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We think all investors should try to buy and hold high quality multi-year winners. And we've seen some truly amazing gains over the years. Just think about the savvy investors who held Xenon Pharmaceuticals Inc. (NASDAQ:XENE) shares for the last five years, while they gained 884%. This just goes to show the value creation that some businesses can achieve. In more good news, the share price has risen 13% in thirty days. We love happy stories like this one. The company should be really proud of that performance!
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
Xenon Pharmaceuticals 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last 5 years Xenon Pharmaceuticals saw its revenue grow at 59% 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 58%(per year) over the same period. It's never too late to start following a top notch stock like Xenon Pharmaceuticals, since some long term winners go on winning for decades. On the face of it, this looks lke a good opportunity, although we note sentiment seems very positive already.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
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. So it makes a lot of sense to check out what analysts think Xenon Pharmaceuticals will earn in the future (free profit forecasts).
A Different Perspective
It's nice to see that Xenon Pharmaceuticals shareholders have received a total shareholder return of 67% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 58% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Xenon Pharmaceuticals better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with Xenon Pharmaceuticals .
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.
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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.