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It hasn't been the best quarter for QuinStreet, Inc. (NASDAQ:QNST) shareholders, since the share price has fallen 23% in that time. But that scarcely detracts from the really solid long term returns generated by the company over five years. We think most investors would be happy with the 127% return, over that period. We think it's more important to dwell on the long term returns than the short term returns. The more important question is whether the stock is too cheap or too expensive today.
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
QuinStreet isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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 QuinStreet saw its revenue grow at 7.5% per year. That's a pretty good long term growth rate. We'd argue this growth has been reflected in the share price which has climbed at a rate of 18% per year over in that time. Given that the business has made good progress on the top line, it would be worth taking a look at the growth trend. When a growth trend accelerates, be it in revenue or earnings, it can indicate an inflection point for the business, which is can often be an opportunity for investors.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time .
A Different Perspective
QuinStreet provided a TSR of 5.8% over the last twelve months. But that was short of the market average. On the bright side, the longer term returns (running at about 18% a year, over half a decade) look better. Maybe the share price is just taking a breather while the business executes on its growth strategy. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 1 warning sign for QuinStreet you should be aware of.