Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Xero Limited (ASX:XRO) share price is up 84% in the last 5 years, clearly besting the market return of around 43% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 28% in the last year.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

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Given that Xero only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

For the last half decade, Xero can boast revenue growth at a rate of 22% per year. Even measured against other revenue-focussed companies, that's a good result. It's good to see that the stock has 13%, but not entirely surprising given revenue shows strong growth. If the strong revenue growth continues, we'd hope to see the share price to follow, in time. Of course, you'll have to research the business more fully to figure out if this is an attractive opportunity.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).ASX:XRO Earnings and Revenue Growth August 12th 2025

It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So we recommend checking out this freereport showing consensus forecasts

A Different Perspective

It's good to see that Xero has rewarded shareholders with a total shareholder return of 28% in the last twelve months. That gain is better than the annual TSR over five years, which is 13%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Xero by clicking this link.

Story Continues

If you like to buy stocks alongside management, then you might just love this freelist of companies. (Hint: most of them are flying under the radar).

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

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