It hasn't been the best quarter for Enorama Pharma AB (publ) (STO:ERMA) shareholders, since the share price has fallen 15% in that time. But that doesn't change the fact that the returns over the last three years have been spectacular. In fact, the share price has taken off in that time, up 553%. So the recent fall doesn't do much to dampen our respect for the business. The thing to consider is whether there is still too much elation around the company's prospects.
We love happy stories like this one. The company should be really proud of that performance!
Because Enorama Pharma made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over the last three years Enorama Pharma has grown its revenue at 38% annually. That's much better than most loss-making companies. In light of this attractive revenue growth, it seems somewhat appropriate that the share price has been rocketing, boasting a gain of 87% per year, over the same period. Despite the strong run, top performers like Enorama Pharma have been known to go on winning for decades. In fact, it might be time to put it on your watchlist, if you're not already familiar with the stock.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
If you are thinking of buying or selling Enorama Pharma stock, you should check out this FREE detailed report on its balance sheet.
What about the Total Shareholder Return (TSR)?
We've already covered Enorama Pharma's share price action, but we should also mention its total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. We note that Enorama Pharma's TSR, at 568% is higher than its share price return of 553%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
Over the last year, Enorama Pharma shareholders took a loss of 25%. In contrast the market gained about 28%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Fortunately the longer term story is brighter, with total returns averaging about 88% per year over three years. Sometimes when a good quality long term winner has a weak period, it's turns out to be an opportunity, but you really need to be sure that the quality is there. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should learn about the 6 warning signs we've spotted with Enorama Pharma (including 2 which is don't sit too well with us) .
Of course Enorama Pharma may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SE exchanges.
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