Generally speaking, investors are inspired to be stock pickers by the potential to find the big winners. But when you hold the right stock for the right time period, the rewards can be truly huge. One bright shining star stock has been Dropsuite Limited (ASX:DSE), which is 740% higher than three years ago. It's also good to see the share price up 11% over the last quarter. Anyone who held for that rewarding ride would probably be keen to talk about it.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Dropsuite isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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 does expect good top-line growth.
Dropsuite's revenue trended up 23% each year over three years. That's much better than most loss-making companies. In light of this attractive revenue growth, it seems somewhat appropriate that the share price has been rocketing, boasting a gain of 103% per year, over the same period. It's always tempting to take profits after a share price gain like that, but high-growth companies like Dropsuite can sometimes sustain strong growth for many years. So we'd recommend you take a closer look at this one, or even put it on your watchlist.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
This free interactive report on Dropsuite'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 Dropsuite has rewarded shareholders with a total shareholder return of 40% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 19% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 2 warning signs we've spotted with Dropsuite .
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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.