Does Acceleron Pharma’s (NASDAQ:XLRN) Share Price Gain of 49% Match Its Business Performance?

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The simplest way to invest in stocks is to buy exchange traded funds. But the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Acceleron Pharma Inc. (NASDAQ:XLRN) share price is 49% higher than it was five years ago, which is more than the market average. Zooming in, the stock is actually down 17% in the last year.

View our latest analysis for Acceleron Pharma

Because Acceleron Pharma is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn’t make profits, we’d generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over the last half decade Acceleron Pharma’s revenue has actually been trending down at about 15% per year. Despite the lack of revenue growth, the stock has returned a respectable 8.3%, compound, over that time. It’s probably worth checking other factors such as the profitability, to try to understand the share price action. It may not be reflecting the revenue.

NasdaqGM:XLRN Income Statement, July 9th 2019
NasdaqGM:XLRN Income Statement, July 9th 2019

It’s probably worth noting we’ve seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

Investors in Acceleron Pharma had a tough year, with a total loss of 17%, against a market gain of about 6.2%. 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 8.3%, 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. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

Acceleron Pharma is not the only stock insiders are buying. So take a peek at this free list of growing companies with 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.