It hasn’t been the best quarter for Amarin Corporation plc (NASDAQ:AMRN) shareholders, since the share price has fallen 16% in that time. But that doesn’t change the fact that shareholders have received really good returns over the last five years. Indeed, the share price is up an impressive 176% in that time. To some, the recent pullback wouldn’t be surprising after such a fast rise. Of course, that doesn’t necessarily mean it’s cheap now. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 61% decline over the last twelve months.
Amarin isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
For the last half decade, Amarin can boast revenue growth at a rate of 38% per year. Even measured against other revenue-focussed companies, that’s a good result. Meanwhile, its share price performance certainly reflects the strong growth, given the share price grew at 22% per year, compound, during the period. So it seems likely that buyers have paid attention to the strong revenue growth. To our minds that makes Amarin worth investigating – it may have its best days ahead.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Amarin is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Amarin in this interactive graph of future profit estimates.
A Different Perspective
Amarin shareholders are down 61% for the year, but the market itself is up 17%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn’t be so upset, since they would have made 22%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Take risks, for example – Amarin has 2 warning signs we think you should be aware of.
We will like Amarin better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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. 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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