While shareholders of AeroVironment (NASDAQ:AVAV) are in the black over 5 years, those who bought a week ago aren't so fortunate

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. Buying under-rated businesses is one path to excess returns. To wit, the AeroVironment share price has climbed 56% in five years, easily topping the market return of 33% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 45%.

In light of the stock dropping 6.1% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

View our latest analysis for AeroVironment

Because AeroVironment 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

For the last half decade, AeroVironment can boast revenue growth at a rate of 12% per year. That's a pretty good long term growth rate. While the share price has beat the market, compounding at 9% yearly, over five years, there's certainly some potential that the market hasn't fully considered the growth track record. The key question is whether revenue growth will slow down, and if so, how quickly. Lack of earnings means you have to project further into the future justify the valuation on the basis of future free cash flow.

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

earnings-and-revenue-growth

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

A Different Perspective

We're pleased to report that AeroVironment shareholders have received a total shareholder return of 45% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 9% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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

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