While shareholders of Extreme Networks (NASDAQ:EXTR) are in the black over 5 years, those who bought a week ago aren't so fortunate

Extreme Networks, Inc. (NASDAQ:EXTR) shareholders might be concerned after seeing the share price drop 11% in the last month. But that scarcely detracts from the really solid long term returns generated by the company over five years. In fact, the share price is 209% higher today. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Of course, that doesn't necessarily mean it's cheap now.

In light of the stock dropping 7.2% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

Check out our latest analysis for Extreme Networks

Because Extreme Networks made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

For the last half decade, Extreme Networks can boast revenue growth at a rate of 5.0% per year. Put simply, that growth rate fails to impress. In comparison, the share price rise of 25% per year over the last half a decade is pretty impressive. While we wouldn't be overly concerned, it might be worth checking whether you think the fundamental business gains really justify the share price action. It may be that the market is pretty optimistic about Extreme Networks.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Take a more thorough look at Extreme Networks' financial health with this free report on its balance sheet.

A Different Perspective

It's good to see that Extreme Networks has rewarded shareholders with a total shareholder return of 21% in the last twelve months. Having said that, the five-year TSR of 25% a year, is even better. If you would like to research Extreme Networks in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.