Long term investing can be life changing when you buy and hold the truly great businesses. While the best companies are hard to find, but they can generate massive returns over long periods. Just think about the savvy investors who held Pure Storage, Inc. (NYSE:PSTG) shares for the last five years, while they gained 306%. This just goes to show the value creation that some businesses can achieve. It's also good to see the share price up 20% over the last quarter. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report.
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
We don't think that Pure Storage's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.
For the last half decade, Pure Storage can boast revenue growth at a rate of 16% per year. Even measured against other revenue-focussed companies, that's a good result. Fortunately, the market has not missed this, and has pushed the share price up by 32% per year in that time. It's never too late to start following a top notch stock like Pure Storage, since some long term winners 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 company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Pure Storage is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling Pure Storage stock, you should check out this free report showing analyst consensus estimates for future profits.
A Different Perspective
It's nice to see that Pure Storage shareholders have received a total shareholder return of 74% over the last year. That's better than the annualised return of 32% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Pure Storage better, we need to consider many other factors. For instance, we've identified 3 warning signs for Pure Storage 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: many of them are unnoticed AND have attractive valuation).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com