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Biomerica, Inc. (NASDAQ:BMRA) shareholders might be concerned after seeing the share price drop 16% in the last month. But that doesn't undermine the fantastic longer term performance (measured over five years). Indeed, the share price is up a whopping 733% in that time. Arguably, the recent fall is to be expected after such a strong rise. The most important thing for savvy investors to consider is whether the underlying business can justify the share price gain.
It really delights us to see such great share price performance for investors.
Biomerica wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
For the last half decade, Biomerica can boast revenue growth at a rate of 0.2% per year. That's not a very high growth rate considering the bottom line. So shareholders should be pretty elated with the 53% increase per year, in that time. We don't think the growth over the period is that great, but it could be that faster growth appears to some to be on the horizon. It's not immediately obvious to us why the market has been so enthusiastic about the stock, but a more detailed look at revenue and profit trends might reveal why shareholders are optimistic.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. If you are thinking of buying or selling Biomerica stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
It's good to see that Biomerica has rewarded shareholders with a total shareholder return of 215% in the last twelve months. That gain is better than the annual TSR over five years, which is 53%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Biomerica better, we need to consider many other factors. For example, we've discovered 3 warning signs for Biomerica that you should be aware of before investing here.
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 US exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
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