Investors ignore increasing losses at NETGEAR (NASDAQ:NTGR) as stock jumps 30% this past week

The simplest way to invest in stocks is to buy exchange traded funds. But if you pick the right individual stocks, you could make more than that. To wit, the NETGEAR, Inc. (NASDAQ:NTGR) share price is 62% higher than it was a year ago, much better than the market return of around 22% (not including dividends) in the same period. That's a solid performance by our standards! In contrast, the longer term returns are negative, since the share price is 35% lower than it was three years ago.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

See our latest analysis for NETGEAR

NETGEAR wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

NETGEAR actually shrunk its revenue over the last year, with a reduction of 19%. The stock is up 62% in that time, a fine performance given the revenue drop. We can correlate the share price rise with revenue or profit growth, but it seems the market had previously expected weaker results, and sentiment around the stock is improving.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

This free interactive report on NETGEAR's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's good to see that NETGEAR has rewarded shareholders with a total shareholder return of 62% in the last twelve months. Notably the five-year annualised TSR loss of 5% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for NETGEAR you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.