Coupa Software Incorporated (NASDAQ:COUP) shareholders might understandably be very concerned that the share price has dropped 48% in the last quarter. But that doesn't change the fact that the returns over the last half decade have been spectacular. In that time, the share price has soared some 368% higher! So it might be that some shareholders are taking profits after good performance. But the real question is whether the business fundamentals can improve over the long term.
Although Coupa Software has shed US$1.0b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
View our latest analysis for Coupa Software
Coupa Software 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last 5 years Coupa Software saw its revenue grow at 33% per year. That's well above most pre-profit companies. Arguably, this is well and truly reflected in the strong share price gain of 36%(per year) over the same period. It's never too late to start following a top notch stock like Coupa Software, since some long term winners 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).
Coupa Software is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Coupa Software in this interactive graph of future profit estimates.
A Different Perspective
Investors in Coupa Software had a tough year, with a total loss of 60%, against a market gain of about 7.1%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 36%, each year, over five years. 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. Even so, be aware that Coupa Software is showing 3 warning signs in our investment analysis , you should know about...