Buying shares in the best businesses can build meaningful wealth for you and your family. And we've seen some truly amazing gains over the years. Just think about the savvy investors who held Cloudflare, Inc. (NYSE:NET) shares for the last five years, while they gained 538%. This just goes to show the value creation that some businesses can achieve. Also pleasing for shareholders was the 46% gain in the last three months. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report. Anyone who held for that rewarding ride would probably be keen to talk about it.

Since the long term performance has been good but there's been a recent pullback of 4.4%, let's check if the fundamentals match the share price.

Check out our latest analysis for Cloudflare

Cloudflare wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. 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 would hope for good top-line growth to make up for the lack of earnings.

For the last half decade, Cloudflare can boast revenue growth at a rate of 33% per year. That's well above most pre-profit companies. Fortunately, the market has not missed this, and has pushed the share price up by 45% per year in that time. It's never too late to start following a top notch stock like Cloudflare, 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.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Cloudflare is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

It's nice to see that Cloudflare shareholders have received a total shareholder return of 45% over the last year. That gain is better than the annual TSR over five years, which is 45%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Cloudflare you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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