We think all investors should try to buy and hold high quality multi-year winners. While not every stock performs well, when investors win, they can win big. Just think about the savvy investors who held Neuren Pharmaceuticals Limited (ASX:NEU) shares for the last five years, while they gained 313%. This just goes to show the value creation that some businesses can achieve. On top of that, the share price is up 67% in about a quarter.
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.
Given that Neuren Pharmaceuticals didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last 5 years Neuren Pharmaceuticals saw its revenue shrink by 16% per year. This is in stark contrast to the strong share price growth of 33%, compound, per year. Obviously, whatever the market is excited about, it's not a track record of revenue growth. I think it's fair to say there is probably a fair bit of excitement in the price.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. You can see what analysts are predicting for Neuren Pharmaceuticals in this interactive graph of future profit estimates.
A Different Perspective
We're pleased to report that Neuren Pharmaceuticals shareholders have received a total shareholder return of 221% over one year. That's better than the annualised return of 33% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Neuren Pharmaceuticals better, we need to consider many other factors. Take risks, for example - Neuren Pharmaceuticals has 1 warning sign we think you should be aware of.
For those who like to find winning investments this free list of growing 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 AU exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here