Returns to shareholders of MicroStrategy (NASDAQ:MSTR) have been splendid, gaining 235% in 3 years
It may sound bad, but the worst that can happen when you buy a stock (unleveraged) is that its market price drops to zero. But when you choose a business that is truly thriving, you can Craft more than 100%. Namely, the MicroStrategy Embedded (NASDAQ:MSTR) the stock price has climbed 235% over the past three years. This kind of back is as solid as granite. In addition to good news, the share price has increased by 15% in thirty days.
Given that the stock has added $209 million to its market capitalization in the past week alone, let’s see if the underlying performance has generated any long-term returns.
Check out our latest analysis for MicroStrategy
MicroStrategy is currently unprofitable, so most analysts would look to revenue growth to get a sense of how fast the underlying business is growing. Generally speaking, companies without profits should increase their revenue every year, and at a good pace. Indeed, it is difficult to be sure that a business will be sustainable if revenue growth is negligible and it never makes a profit.
Over the past three years, MicroStrategy has grown its revenue by 1.2% per year. Given that the company is losing money, we think the rate of revenue growth is uninspiring. By comparison, the rise in share price of 50% per year over the past three years is quite impressive. We would need to take a closer look at revenue and earnings trends to see if the improvements could justify this kind of increase. It seems likely that the market is quite optimistic about MicroStrategy, given that it is losing money.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see exact values).
We are pleased to report that the CEO is compensated more modestly than most CEOs of similarly capitalized companies. It’s always worth keeping an eye on CEO compensation, but a more important question is whether the company will grow its profits over the years. If you are considering buying or selling MicroStrategy stock, you should check out this free report showing analyst earnings forecast.
A different perspective
While the broader market gained about 6.4% last year, MicroStrategy shareholders lost 30%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer-term investors wouldn’t be so upset, as they would have gained 22%, every year, over five years. If fundamentals continue to point to sustainable long-term growth, the current sell-off could be an opportunity to consider. I find it very interesting to look at stock price over the long term as a proxy for company performance. But to really get insight, we also need to consider other information. Take risks, for example – MicroStrategy has 4 warning signs (and 1 which is potentially serious) that we think you should know about.
Sure, you might find a fantastic investment by looking elsewhere. So take a look at this free list of companies that we believe will increase their profits.
Please note that the market returns quoted in this article reflect the average market-weighted returns of stocks currently trading on US exchanges.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.