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For many, the main point of investing in the stock market is to achieve spectacular returns. And highest quality companies can see their share prices grow by huge amounts. Don't believe it? Then look at the Natera, Inc. (NASDAQ:NTRA) share price. It's 373% higher than it was five years ago. If that doesn't get you thinking about long term investing, we don't know what will. And in the last month, the share price has gained 39%.
The past week has proven to be lucrative for Natera investors, so let's see if fundamentals drove the company's five-year performance.
Natera 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, Natera can boast revenue growth at a rate of 25% per year. Even measured against other revenue-focussed companies, that's a good result. Arguably, this is well and truly reflected in the strong share price gain of 36%(per year) over the same period. Despite the strong run, top performers like Natera have been known to go on winning for decades. On the face of it, this looks lke a good opportunity, although we note sentiment seems very positive already.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. You can see what analysts are predicting for Natera in this interactive graph of future profit estimates.
A Different Perspective
We regret to report that Natera shareholders are down 59% for the year. Unfortunately, that's worse than the broader market decline of 16%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 36% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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 3 warning signs with Natera , and understanding them should be part of your investment process.
Natera is not the only stock that insiders are buying. 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.
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.
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