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Investors bid Megaport (ASX:MP1) up AU$220m despite increasing losses YoY, taking five-year CAGR to 9.8%

While Megaport Limited (ASX:MP1) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 24% in the last quarter. But that doesn't change the fact that the returns over the last five years have been pleasing. Its return of 59% has certainly bested the market return! Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 35% decline over the last twelve months.

The past week has proven to be lucrative for Megaport investors, so let's see if fundamentals drove the company's five-year performance.

View our latest analysis for Megaport

Given that Megaport 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

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In the last 5 years Megaport saw its revenue grow at 36% per year. That's well above most pre-profit companies. It's good to see that the stock has 10%, but not entirely surprising given revenue shows strong growth. If the strong revenue growth continues, we'd expect the share price to follow, in time. Of course, you'll have to research the business more fully to figure out if this is an attractive opportunity.

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
earnings-and-revenue-growth

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 Megaport

A Different Perspective

Megaport shareholders are down 35% for the year, but the market itself is up 1.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 10% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Case in point: We've spotted 1 warning sign for Megaport 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 Australian 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.

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