Yahoo Finance Workday (NASDAQ:WDAY) shareholders have earned a 6.3% CAGR over the last five years
The main point of investing for the long term is to make money. Furthermore, you'd generally like to see the share price rise faster than the market. Unfortunately for shareholders, while the Workday, Inc. (NASDAQ:WDAY) share price is up 35% in the last five years, that's less than the market return. Meanwhile, the last twelve months saw the share price rise 3.0%.
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
Check out our latest analysis for Workday
Workday 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last 5 years Workday saw its revenue grow at 20% per year. Even measured against other revenue-focussed companies, that's a good result. While long-term shareholders have made money, the 6% per year gain over five years fall short of the market return. You could argue the market is still pretty skeptical, given the growing revenues. Arguably this falls in a potential sweet spot - modest share price gains but good top line growth over the long term justifies investigation, in our book.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Workday is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling Workday stock, you should check out this free report showing analyst consensus estimates for future profits.
A Different Perspective
It's nice to see that Workday shareholders have received a total shareholder return of 3.0% over the last year. Having said that, the five-year TSR of 6% a year, is even better. 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. Even so, be aware that Workday is showing 2 warning signs in our investment analysis , you should know about...
Of course Workday may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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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