Long term investing can be life changing when you buy and hold the truly great businesses. And highest quality companies can see their share prices grow by huge amounts. Just think about the savvy investors who held Palo Alto Networks, Inc. (NASDAQ:PANW) shares for the last five years, while they gained 549%. And this is just one example of the epic gains achieved by some long term investors. Anyone who held for that rewarding ride would probably be keen to talk about it.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

See our latest analysis for Palo Alto Networks

We don't think that Palo Alto Networks' 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.

In the last 5 years Palo Alto Networks saw its revenue grow at 21% per year. Even measured against other revenue-focussed companies, that's a good result. Fortunately, the market has not missed this, and has pushed the share price up by 45% per year in that time. Despite the strong run, top performers like Palo Alto Networks have been known to go on winning for decades. On the face of it, this looks lke a good opportunity, although we note sentiment seems very positive already.

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

Palo Alto Networks 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 Palo Alto Networks in this interactive graph of future profit estimates.

A Different Perspective

It's good to see that Palo Alto Networks has rewarded shareholders with a total shareholder return of 26% in the last twelve months. However, the TSR over five years, coming in at 45% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. 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. For example, we've discovered 2 warning signs for Palo Alto Networks that you should be aware of before investing here.

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.

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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.