It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But in contrast you can make much more than 100% if the company does well. For example, the Mirum Pharmaceuticals, Inc. (NASDAQ:MIRM) share price has soared 175% in the last three years. Most would be happy with that. We note the stock price is up 3.0% in the last seven days.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
Given that Mirum Pharmaceuticals didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually desire strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Over the last three years Mirum Pharmaceuticals has grown its revenue at 80% annually. That's well above most pre-profit companies. Meanwhile, the share price performance has been pretty solid at 40% compound over three years. But it does seem like the market is paying attention to strong revenue growth. Nonetheless, we'd say Mirum Pharmaceuticals is still worth investigating - successful businesses can often keep growing for long periods.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
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. This free report showing analyst forecasts should help you form a view on Mirum Pharmaceuticals
A Different Perspective
It's good to see that Mirum Pharmaceuticals has rewarded shareholders with a total shareholder return of 48% in the last twelve months. That's better than the annualised return of 17% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Mirum Pharmaceuticals , 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 undervalued small cap 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 American exchanges.
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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.
