Avalara, Inc. (NYSE:AVLR) shareholders might be concerned after seeing the share price drop 17% in the last quarter. Despite this, the stock is a strong performer over the last year, no doubt about that. During that period, the share price soared a full 129%. So it is important to view the recent reduction in price through that lense. Investors should be wondering whether the business itself has the fundamental value required to continue to drive gains.
Given that Avalara 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 expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over the last twelve months, Avalara's revenue grew by 39%. We respect that sort of growth, no doubt. The revenue growth is decent but the share price had an even better year, gaining 129%. Given that the business has made good progress on the top line, it would be worth taking a look at its path to profitability. Of course, we are always cautious about succumbing to 'fear of missing out' when a stock has shot up strongly.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
It's probably worth noting that the CEO is paid less than the median at similar sized 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. So it makes a lot of sense to check out what analysts think Avalara will earn in the future (free profit forecasts).
What about the Total Shareholder Return (TSR)?
We've already covered Avalara's share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. We note that Avalara's TSR, at 131% is higher than its share price return of 129%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
Avalara shareholders should be happy with the total gain of 131% over the last twelve months. We regret to report that the share price is down 17% over ninety days. Shorter term share price moves often don't signify much about the business itself. Before spending more time on Avalara it might be wise to click here to see if insiders have been buying or selling shares.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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