When you buy shares in a company, it’s worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, you can make far more than 100% on a really good stock. One great example is Merus N.V. (NASDAQ:MRUS) which saw its share price drive 227% higher over five years.
So let’s investigate and see if the longer term performance of the company has been in line with the underlying business’ progress.
See our latest analysis for Merus
Merus 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.
In the last 5 years Merus saw its revenue grow at 6.9% per year. That’s a fairly respectable growth rate. Broadly speaking, this solid progress may well be reflected by the healthy share price gain of 27% per year over five years. It’s well worth monitoring the growth trend in revenue, because if growth accelerates, that might signal an opportunity. Accelerating growth can be a sign of an inflection point – and could indicate profits lie ahead. Worth watching 100%
The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Merus is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Merus stock, you should check out this free report showing analyst consensus estimates for future profits.
A Different Perspective
It’s nice to see that Merus shareholders have received a total shareholder return of 150% over the last year. That’s better than the annualised return of 27% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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 2 warning signs with Merus , and understanding them should be part of your investment process.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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.