Unless you borrow money to invest, the potential losses are limited. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Guidewire Software, Inc. (NYSE:GWRE) share price has soared 103% return in just a single year. Also pleasing for shareholders was the 37% gain in the last three months. It is also impressive that the stock is up 79% over three years, adding to the sense that it is a real winner.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

Guidewire Software isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally hope to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last year Guidewire Software saw its revenue grow by 8.3%. That's not great considering the company is losing money. In contrast, the share price took off during the year, gaining 103%. The business will need a lot more growth to justify that increase. We're not so sure that revenue growth is driving the market optimism about the stock.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Guidewire Software 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 Guidewire Software in this interactive graph of future profit estimates.

A Different Perspective

It's nice to see that Guidewire Software shareholders have received a total shareholder return of 103% over the last year. That gain is better than the annual TSR over five years, which is 11%. Therefore it seems like sentiment around the company has been positive lately. 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. For example, we've discovered 1 warning sign for Guidewire Software that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.