When you buy and hold a stock for the long term, you definitely want it to provide a positive return. But more than that, you probably want to see it rise more than the market average. Unfortunately for shareholders, while the Model N, Inc. (NYSE:MODN) share price is up 53% in the last five years, that's less than the market return. The last year has been disappointing, with the stock price down 16% in that time.

Since the stock has added US$68m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Model N isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last 5 years Model N saw its revenue grow at 13% per year. That's a fairly respectable growth rate. While the share price has gained 9% per year for five years, that's hardly amazing considering the market also rose. Arguably, that means, the market (previously) expected stronger growth from the company.

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

Model N is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So it makes a lot of sense to check out what analysts think Model N will earn in the future (free analyst consensus estimates)

A Different Perspective

Investors in Model N had a tough year, with a total loss of 16%, against a market gain of about 33%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 9%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Model N better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Model N you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.