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While some are satisfied with an index fund, active investors aim to find truly magnificent investments on the stock market. When you find (and hold) a big winner, you can markedly improve your finances. For example, the Moderna, Inc. (NASDAQ:MRNA) share price is up a whopping 327% in the last year, a handsome return in a single year. But it's down 6.3% in the last week. But note that the broader market is down 0.8% since last week, and this may have impacted Moderna's share price. Note that businesses generally develop over the long term, so the returns over the last year might not reflect a long term trend.
Moderna isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Moderna actually shrunk its revenue over the last year, with a reduction of 0.2%. This is in stark contrast to the splendorous stock price, which has rocketed 327% since this time a year ago. There can be no doubt this kind of decoupling of revenue growth and share price growth is unusual to see in loss making companies. Typically, when we see this in a biotech stock, it's because investors are getting excited about an impending drug development milestone, such as clinical trial results. While this gain looks like speculative buying to us, sometimes speculation pays off.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. You can see what analysts are predicting for Moderna in this interactive graph of future profit estimates.
A Different Perspective
Moderna boasts a total shareholder return of 327% for the last year. Unfortunately the share price is down 3.2% over the last quarter. Shorter term share price moves often don't signify much about the business itself. It's always interesting to track share price performance over the longer term. But to understand Moderna better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Moderna , and understanding them should be part of your investment process.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
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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