We think all investors should try to buy and hold high quality multi-year winners. And we've seen some truly amazing gains over the years. To wit, the Evolent Health, Inc. (NYSE:EVH) share price has soared 313% over five years. And this is just one example of the epic gains achieved by some long term investors. And in the last month, the share price has gained 49%.
While the stock has fallen 5.1% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.
Given that Evolent Health 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. When a company doesn't make profits, we'd generally hope to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.
For the last half decade, Evolent Health can boast revenue growth at a rate of 24% per year. That's well above most pre-profit companies. Arguably, this is well and truly reflected in the strong share price gain of 33%(per year) over the same period. It's never too late to start following a top notch stock like Evolent Health, since some long term winners go on winning for decades. On the face of it, this looks lke a good opportunity, although we note sentiment seems very positive already.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Evolent Health is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
Evolent Health shareholders are up 19% for the year. But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 33% per year for five years. 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 for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Evolent Health , and understanding them should be part of your investment process.
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.