Unless you borrow money to invest, the potential losses are limited. But when you pick a company that is really flourishing, you can make more than 100%. Take, for example Q2 Holdings, Inc. (NYSE:QTWO). Its share price is already up an impressive 146% in the last twelve months. It's also good to see the share price up 33% over the last quarter. However, the stock hasn't done so well in the longer term, with the stock only up 7.0% in three years.
On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.
Given that Q2 Holdings 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 desire strong 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.
Over the last twelve months, Q2 Holdings' revenue grew by 9.5%. That's not a very high growth rate considering it doesn't make profits. In contrast, the share price took off during the year, gaining 146%. We're happy that investors have made money, though we wonder if the increase will be sustained. We're not so sure that revenue growth is driving the market optimism about the stock.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Q2 Holdings 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 Q2 Holdings stock, you should check out this free report showing analyst consensus estimates for future profits.
A Different Perspective
It's good to see that Q2 Holdings has rewarded shareholders with a total shareholder return of 146% in the last twelve months. That gain is better than the annual TSR over five years, which is 0.6%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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 3 warning signs for Q2 Holdings you should know about.
But note: Q2 Holdings 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 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.
