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The main point of investing for the long term is to make money. Better yet, you'd like to see the share price move up more than the market average. Unfortunately for shareholders, while the Marrone Bio Innovations, Inc. (NASDAQ:MBII) share price is up 67% in the last five years, that's less than the market return. However, more recent buyers should be happy with the increase of 26% over the last year.
Marrone Bio Innovations 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. 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.
In the last 5 years Marrone Bio Innovations saw its revenue grow at 26% per year. That's well above most pre-profit companies. It's nice to see shareholders have made a profit, but the gain of 11% over the period isn't that impressive compared to the overall market. That's surprising given the strong revenue growth. Arguably this falls in a potential sweet spot - modest share price gains but good top line growth over the long term justifies investigation, in our book.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
This free interactive report on Marrone Bio Innovations' balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Marrone Bio Innovations' TSR for the year was broadly in line with the market average, at 26%. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 11%. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. 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. For instance, we've identified 2 warning signs for Marrone Bio Innovations that you should be aware of.
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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