The five-year returns have been impressive for PAR Technology (NYSE:PAR) shareholders despite underlying losses increasing

If you want to compound wealth in the stock market, you can do so by buying an index fund. But the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the PAR Technology Corporation (NYSE:PAR) share price is 98% higher than it was five years ago, which is more than the market average. We're also happy to report the stock is up a healthy 43% in the last year.

Since the stock has added US$87m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for PAR Technology

Because PAR Technology 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. Shareholders of unprofitable companies usually desire strong revenue growth. 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.

In the last 5 years PAR Technology saw its revenue grow at 20% per year. That's well above most pre-profit companies. While the compound gain of 15% per year is good, it's not unreasonable given the strong revenue growth. If you think there could be more growth to come, now might be the time to take a close look at PAR Technology. Of course, you'll have to research the business more fully to figure out if this is an attractive opportunity.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between PAR Technology's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. We note that PAR Technology's TSR, at 100% is higher than its share price return of 98%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.

A Different Perspective

It's nice to see that PAR Technology shareholders have received a total shareholder return of 43% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 15% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. For instance, we've identified 2 warning signs for PAR Technology that you should be aware of.

Of course PAR Technology may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com