Dropsuite (ASX:DSE) shareholders have earned a 56% CAGR over the last five years

Buying shares in the best businesses can build meaningful wealth for you and your family. While not every stock performs well, when investors win, they can win big. Just think about the savvy investors who held Dropsuite Limited (ASX:DSE) shares for the last five years, while they gained 826%. If that doesn't get you thinking about long term investing, we don't know what will. And in the last month, the share price has gained 19%. Anyone who held for that rewarding ride would probably be keen to talk about it.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

See our latest analysis for Dropsuite

While Dropsuite made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. 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 Dropsuite saw its revenue grow at 36% per year. That's well above most pre-profit companies. Arguably, this is well and truly reflected in the strong share price gain of 56%(per year) over the same period. Despite the strong run, top performers like Dropsuite have been known to go on winning for decades. So we'd recommend you take a closer look at this one, but keep in mind the market seems optimistic.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth

We know that Dropsuite has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Dropsuite's financial health with this free report on its balance sheet.

A Different Perspective

It's good to see that Dropsuite has rewarded shareholders with a total shareholder return of 16% in the last twelve months. However, the TSR over five years, coming in at 56% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. 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 1 warning sign with Dropsuite , 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: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian 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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