For us, stock picking is in large part the hunt for the truly magnificent stocks. But when you hold the right stock for the right time period, the rewards can be truly huge. One bright shining star stock has been Reata Pharmaceuticals, Inc. (NASDAQ:RETA), which is 736% higher than three years ago. And in the last month, the share price has gained 1.6%.
We love happy stories like this one. The company should be really proud of that performance!
Because Reata Pharmaceuticals 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. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last 3 years Reata Pharmaceuticals saw its revenue shrink by 7.9% per year. So it’s pretty amazing to see the stock price has zoomed up 103% per year in that time. There can be no doubt this kind of decoupling of revenue growth and share price growth is unusual to see in loss making companies. At the risk of upsetting holders, this does suggest that hope for a better future is playing a significant role in the share price action.
The company’s revenue and earnings (over time) are depicted in the image below.
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
Pleasingly, Reata Pharmaceuticals’s total shareholder return last year was 228%. So this year’s TSR was actually better than the three-year TSR (annualized) of 103%. These improved returns may hint at some real business momentum, implying that now could be a great time to delve deeper. 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.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing 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 US exchanges.
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