Is Napster Group's (LON:NAPS) 124% Share Price Increase Well Justified?

It hasn't been the best quarter for Napster Group PLC (LON:NAPS) shareholders, since the share price has fallen 16% in that time. But that doesn't change the fact that shareholders have received really good returns over the last five years. In fact, the share price is 124% higher today. We think it's more important to dwell on the long term returns than the short term returns. The more important question is whether the stock is too cheap or too expensive today. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 59% drop, in the last year.

See our latest analysis for Napster Group

Napster Group 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. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

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

earnings-and-revenue-growth

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

A Different Perspective

While the broader market gained around 24% in the last year, Napster Group shareholders lost 59%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 18%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Napster Group better, we need to consider many other factors. For example, we've discovered 5 warning signs for Napster Group (2 are significant!) that you should be aware of before investing here.

But note: Napster Group may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

This article by Simply Wall St is general in nature. 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.

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