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Long term investing can be life changing when you buy and hold the truly great businesses. And highest quality companies can see their share prices grow by huge amounts. Just think about the savvy investors who held Life360, Inc. (ASX:360) shares for the last five years, while they gained 623%. If that doesn't get you thinking about long term investing, we don't know what will. On top of that, the share price is up 11% in about a quarter. It really delights us to see such great share price performance for investors.
Since the stock has added AU$224m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
Check out our latest analysis for Life360
Because Life360 made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
For the last half decade, Life360 can boast revenue growth at a rate of 38% per year. Even measured against other revenue-focussed companies, that's a good result. Arguably, this is well and truly reflected in the strong share price gain of 49%(per year) over the same period. Despite the strong run, top performers like Life360 have been known to go on winning for decades. So we'd recommend you take a closer look at this one, but keep in mind the market seems optimistic.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Life360 is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts
What About The Total Shareholder Return (TSR)?
We've already covered Life360's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Life360 hasn't been paying dividends, but its TSR of 628% exceeds its share price return of 623%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
It's good to see that Life360 has rewarded shareholders with a total shareholder return of 246% in the last twelve months. That's better than the annualised return of 49% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Life360 better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Life360 you should know about.