Some Calix Limited (ASX:CXL) shareholders are probably rather concerned to see the share price fall 39% over the last three months. But over three years the performance has been really wonderful. In fact, the share price has taken off in that time, up 594%. So you might argue that the recent reduction in the share price is unremarkable in light of the longer term performance. The only way to form a view of whether the current price is justified is to consider the merits of the business itself. We love happy stories like this one. The company should be really proud of that performance!
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
Calix wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over the last three years Calix has grown its revenue at 57% annually. That's well above most pre-profit companies. In light of this attractive revenue growth, it seems somewhat appropriate that the share price has been rocketing, boasting a gain of 91% per year, over the same period. It's always tempting to take profits after a share price gain like that, but high-growth companies like Calix can sometimes sustain strong growth for many years. In fact, it might be time to put it on your watchlist, if you're not already familiar with the stock.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free report showing analyst forecasts should help you form a view on Calix
A Different Perspective
We're pleased to report that Calix rewarded shareholders with a total shareholder return of 72% over the last year. The TSR has been even better over three years, coming in at 91% per year. 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 Calix (at least 1 which can't be ignored) , and understanding them should be part of your investment process.
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 AU 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.
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