If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can significantly boost your returns by picking above-average stocks. To wit, the BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) share price is 54% higher than it was a year ago, much better than the market return of around 6.0% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! And shareholders have also done well over the long term, with an increase of 41% in the last three years.
We don't think that BioMarin Pharmaceutical's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.
Over the last twelve months, BioMarin Pharmaceutical's revenue grew by 19%. We respect that sort of growth, no doubt. While the share price performed well, gaining 54% over twelve months, you could argue the revenue growth warranted it. If the company can maintain the revenue growth, the share price could go higher still. But it's crucial to check profitability and cash flow before forming a view on the future.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
BioMarin Pharmaceutical 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 BioMarin Pharmaceutical in this interactive graph of future profit estimates.
A Different Perspective
It's nice to see that BioMarin Pharmaceutical shareholders have received a total shareholder return of 54% over the last year. Notably the five-year annualised TSR loss of 2.8% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with BioMarin Pharmaceutical , and understanding them should be part of your investment process.
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 US exchanges.
This article by Simply Wall St is general in nature. 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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