When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, you can make far more than 100% on a really good stock. For example, the Extreme Networks, Inc. (NASDAQ:EXTR) share price has soared 131% in the last half decade. Most would be very happy with that. In more good news, the share price has risen 14% in thirty days.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

Extreme Networks 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. When a company doesn't make profits, we'd generally hope to see good revenue growth. 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, Extreme Networks can boast revenue growth at a rate of 5.8% per year. That's not a very high growth rate considering the bottom line. In comparison, the share price rise of 18% per year over the last half a decade is pretty impressive. Shareholders should be pretty happy with that, although interested investors might want to examine the financial data more closely to see if the gains are really justified. Some might suggest that the sentiment around the stock is rather positive.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

This free interactive report on Extreme Networks' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Investors in Extreme Networks had a tough year, with a total loss of 1.4%, against a market gain of about 26%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 18% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. If you would like to research Extreme Networks in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.