Freshpet's (NASDAQ:FRPT) investors will be pleased with their splendid 132% return over the last five years

Simply Wall St · 01/07 11:42

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Freshpet, Inc. (NASDAQ:FRPT) share price has soared 132% in the last half decade. Most would be very happy with that. In the last week shares have slid back 2.5%.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

Check out our latest analysis for Freshpet

Given that Freshpet only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last 5 years Freshpet saw its revenue grow at 28% per year. That's well above most pre-profit companies. So it's not entirely surprising that the share price reflected this performance by increasing at a rate of 18% per year, in that time. So it seems likely that buyers have paid attention to the strong revenue growth. To our minds that makes Freshpet worth investigating - it may have its best days ahead.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
NasdaqGM:FRPT Earnings and Revenue Growth January 7th 2025

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized 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. You can see what analysts are predicting for Freshpet in this interactive graph of future profit estimates.

A Different Perspective

It's nice to see that Freshpet shareholders have received a total shareholder return of 75% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 18% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Freshpet , and understanding them should be part of your investment process.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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