Advertisement
Australia markets open in 7 hours 47 minutes
  • ALL ORDS

    8,015.80
    +72.20 (+0.91%)
     
  • AUD/USD

    0.6656
    +0.0043 (+0.65%)
     
  • ASX 200

    7,778.10
    +77.80 (+1.01%)
     
  • OIL

    81.14
    +0.81 (+1.01%)
     
  • GOLD

    2,343.80
    +14.80 (+0.64%)
     
  • Bitcoin AUD

    96,931.39
    -1,411.17 (-1.43%)
     
  • CMC Crypto 200

    1,323.53
    -65.87 (-4.74%)
     

Investing in Spotify Technology (NYSE:SPOT) five years ago would have delivered you a 135% gain

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on a lighter note, a good company can see its share price rise well over 100%. One great example is Spotify Technology S.A. (NYSE:SPOT) which saw its share price drive 135% higher over five years. On top of that, the share price is up 17% in about a quarter.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

Check out our latest analysis for Spotify Technology

Given that Spotify Technology 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

ADVERTISEMENT

In the last 5 years Spotify Technology saw its revenue grow at 17% per year. That's well above most pre-profit companies. Meanwhile, its share price performance certainly reflects the strong growth, given the share price grew at 19% per year, compound, during the period. This suggests the market has well and truly recognized the progress the business has made. To our minds that makes Spotify Technology worth investigating - it may have its best days ahead.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

earnings-and-revenue-growth
earnings-and-revenue-growth

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

It's good to see that Spotify Technology has rewarded shareholders with a total shareholder return of 104% in the last twelve months. That's better than the annualised return of 19% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Spotify Technology better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Spotify Technology you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.