Praemium (ASX:PPS) shareholders have earned a 12% CAGR over the last five years

The last three months have been tough on Praemium Limited (ASX:PPS) shareholders, who have seen the share price decline a rather worrying 52%. But that doesn't change the fact that the returns over the last five years have been pleasing. Its return of 79% has certainly bested the market return!

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

View our latest analysis for Praemium

Given that Praemium didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

For the last half decade, Praemium can boast revenue growth at a rate of 14% per year. That's a pretty good long term growth rate. While the share price has beat the market, compounding at 12% yearly, over five years, there's certainly some potential that the market hasn't fully considered the growth track record. If revenue growth can maintain for long enough, it's likely profits will flow. There's no doubt that it can be difficult to value pre-profit companies.

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

earnings-and-revenue-growth

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

A Different Perspective

Praemium shareholders are up 6.9% for the year. But that was short of the market average. On the bright side, the longer term returns (running at about 12% a year, over half a decade) look better. Maybe the share price is just taking a breather while the business executes on its growth strategy. 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 Praemium you should know about.

But note: Praemium 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 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.