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Diversification is a key tool for dealing with stock price volatility. But if you’re going to beat the market overall, you need to have individual stocks that outperform. One such company is Dynatrace, Inc. (NYSE: DT), which saw its share price increase 42% in the last year, slightly above the market return of around 39% (not including dividends). Note that businesses generally develop over the long term, so the returns over the last year might not reflect a long term trend.
View our latest analysis for Dynatrace
We don’t think that Dynatrace’s modest trailing twelve month profit has the market’s full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
Dynatrace grew its revenue by 29% last year. We respect that sort of growth, no doubt. While the share price performed well, gaining 42% over twelve months, you could argue the revenue growth warranted it. If revenue stays on trend, there may be plenty more share price gains to come. But it’s crucial to check profitability and cash flow before forming a view on the future.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values ​​by clicking on the image).
It’s probably worth noting that the CEO is paid less than the median at similar sized companies. It’s always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. If you are thinking of buying or selling Dynatrace stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
With a TSR of 42% over the last year, Dynatrace shareholders would be reasonably content, given that’s not far from the broader market return of 41%. A substantial portion of that gain has come in the last three months, with the stock up 17% in that time. It could be that word is spreading about its positive business attributes. It’s always interesting to track share price performance over the longer term. But to understand Dynatrace better, we need to consider many other factors. Case in point: We’ve spotted 2 warning signs for Dynatrace you should be aware of.
Purpose note: Dynatrace may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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This article by Simply Wall St is general in nature. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
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