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Sprout Social's (NASDAQ:SPT) investors will be pleased with their splendid 240% return over the last three years

It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But when you pick a company that is really flourishing, you can make more than 100%. To wit, the Sprout Social, Inc. (NASDAQ:SPT) share price has flown 240% in the last three years. How nice for those who held the stock! In more good news, the share price has risen 24% in thirty days.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

See our latest analysis for Sprout Social

Given that Sprout Social didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

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In the last 3 years Sprout Social saw its revenue grow at 31% per year. That's well above most pre-profit companies. Meanwhile, the share price performance has been pretty solid at 50% compound over three years. But it does seem like the market is paying attention to strong revenue growth. That's not to say we think the share price is too high. In fact, it might be worth keeping an eye on this one.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

earnings-and-revenue-growth
earnings-and-revenue-growth

Sprout Social is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Sprout Social in this interactive graph of future profit estimates.

A Different Perspective

Sprout Social shareholders are down 7.8% over twelve months, which isn't far from the market return of -8.1%. Over the last three years, shareholders booked a gain of 50% per year - better than the last year, that's for sure!. It could be worth doing some further research, because it may be that the long term future remains bright (and the lower share price an opportunity). It's always interesting to track share price performance over the longer term. But to understand Sprout Social better, we need to consider many other factors. Take risks, for example - Sprout Social has 3 warning signs (and 1 which is a bit concerning) we think you should know about.

We will like Sprout Social better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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