This article first appeared on Simply Wall St News.
Palo Alto Networks, Inc.(NYSE: PANW) has just reached a new all-time high after posting a surprising result. Although the company remains unprofitable according to generally accepted accounting principles (GAAP), this obviously does not prevent it from generating returns for its investors.
In this article, we will take a look at the latest developments around the business and the total returns for the last 5 year period.
Fourth fiscal quarter results
Non-GAAP EPS: US $ 1.60 (vs. US $ 0.16)
GAAP EPS: – $ 1.23 ($ 0.07 shortfall)
Revenue: US $ 1.22 billion (vs. US $ 50 million)
Y / Y revenue: + 28.4%
You can keep up to date with the latest figures by reading our company report.
The forecast for 2022 is now set at $ 6.60-6.65 billion, representing annual growth of 21-22 percent, with total revenue of between $ 5.275 billion and $ 5.235 billion, compared to a consensus of US $ 5.02 billion. .
CEO Nikesh Arora cited the increase in cybersecurity attacks in recent months as a driver of demand for the company’s technology. It’s no surprise after T-Mobile revealed a network hack affecting tens of millions of customers last week.
On the news, the stock has climbed more than 20% in 4 consecutive positive sessions, reaching a new all-time high at US $ 461.28.
In the meantime, the board of directors has authorized additional share buybacks, bringing the buyback plan to US $ 1 billion by the end of 2022.
Given the high growth prospects in a low interest rate environment, the share buyback appears to be a reasonable idea.
Given that the stock added US $ 9.1 billion to its market cap in the past week alone, let’s see if the underlying performance has generated any long-term returns.
Check out our latest review for Palo Alto Networks
Palo Alto Networks is still not profitable, so most analysts would look to revenue growth to understand how fast the underlying business is growing. Shareholders of unprofitable companies generally expect strong revenue growth. As you can imagine, rapid revenue growth, when sustained, often leads to rapid profit growth.
Over the past 5 years, Palo Alto Networks has seen its revenue increase by 21% per year. Even compared to other revenue-driven businesses, this is a good result. It is therefore not entirely surprising that the stock price reflected this performance by increasing at a rate of 26% per annum during this period. So it seems likely that buyers paid attention to the strong revenue growth.
The graph below illustrates the evolution of earnings and income over time (reveal the exact values by clicking on the image).
We are happy to report that the CEO is paid more modestly than most similar capitalization companies. It’s always worth keeping an eye on CEO compensation, but a bigger question is whether the company will increase profits over the years. You can see what analysts are predicting for Palo Alto Networks in this interactive graph of future profit estimates.
A different perspective
It is good to see that Palo Alto Networks has rewarded its shareholders with an 81% total shareholder return over the past twelve months. In addition, the 5-year gain now stands at 218%, significantly outperforming the S & P500 which delivered “only” 107% over the same period.
This is better than the 26% annualized return over half a decade, which implies that the company has been doing better recently. Someone with an optimistic outlook might view the recent improvement in TSR as indicating that the business itself is improving over time. It is always interesting to follow the evolution of stock prices over the long term. But to better understand Palo Alto Networks, there are many other factors that we need to consider. Consider, for example, the ever-present specter of investment risk.
We have identified 3 warning signs with Palo Alto Networks, and understanding them should be part of your investment process.
If you are interested in more opportunities you may want to see this free collection of growth stocks.
Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently traded on US stock exchanges.
Simply Wall St analyst Stjepan Kalinic and Simply Wall St have no positions in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents.
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