Datadog, Inc. (NASDAQ:DDOG) shareholders have seen the share price descend 14% over the month. But that scarcely detracts from the really solid long term returns generated by the company over five years. In fact, the share price is 254% higher today. We think it's more important to dwell on the long term returns than the short term returns. The more important question is whether the stock is too cheap or too expensive today.
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
Given that Datadog only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
In the last 5 years Datadog saw its revenue grow at 37% per year. Even measured against other revenue-focussed companies, that's a good result. Meanwhile, its share price performance certainly reflects the strong growth, given the share price grew at 29% per year, compound, during the period. So it seems likely that buyers have paid attention to the strong revenue growth. Datadog seems like a high growth stock - so growth investors might want to add it to their watchlist.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Datadog is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
Datadog provided a TSR of 21% over the last twelve months. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 29% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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. Take risks, for example - Datadog has 2 warning signs we think you should be aware of.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
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.
