Buying shares in the best businesses can build meaningful wealth for you and your family. And highest quality companies can see their share prices grow by huge amounts. To wit, the Nearmap Ltd (ASX:NEA) share price has soared 547% over five years. And this is just one example of the epic gains achieved by some long term investors. In more good news, the share price has risen -5.0% in thirty days.
It really delights us to see such great share price performance for investors.
Nearmap 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. 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.
In the last 5 years Nearmap saw its revenue grow at 28% per year. Even measured against other revenue-focussed companies, that's a good result. Arguably, this is well and truly reflected in the strong share price gain of 45%(per year) over the same period. Despite the strong run, top performers like Nearmap have been known to go on winning for decades. So we'd recommend you take a closer look at this one, but keep in mind the market seems optimistic.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. This free report showing analyst forecasts should help you form a view on Nearmap
A Different Perspective
While the broader market lost about 3.5% in the twelve months, Nearmap shareholders did even worse, losing 9.2%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 45%, 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. 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. For instance, we've identified 4 warning signs for Nearmap that you should be aware of.
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.
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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