Shareholders have faith in loss-making Recce Pharmaceuticals (ASX:RCE) as stock climbs 11% in past week, taking five-year gain to 177%

When you buy a stock there is always a possibility that it could drop 100%. But when you pick a company that is really flourishing, you can make more than 100%. Long term Recce Pharmaceuticals Ltd (ASX:RCE) shareholders would be well aware of this, since the stock is up 174% in five years. Also pleasing for shareholders was the 34% gain in the last three months.

The past week has proven to be lucrative for Recce Pharmaceuticals investors, so let's see if fundamentals drove the company's five-year performance.

View our latest analysis for Recce Pharmaceuticals

Recce Pharmaceuticals isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

For the last half decade, Recce Pharmaceuticals can boast revenue growth at a rate of 42% per year. That's well above most pre-profit companies. 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. Recce Pharmaceuticals seems like a high growth stock - so growth investors might want to add it to their watchlist.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free report showing analyst forecasts should help you form a view on Recce Pharmaceuticals

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Recce Pharmaceuticals' total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Recce Pharmaceuticals hasn't been paying dividends, but its TSR of 177% exceeds its share price return of 174%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

Recce Pharmaceuticals shareholders are down 8.3% for the year, but the market itself is up 10%. 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. On the bright side, long term shareholders have made money, with a gain of 23% per year over half a decade. 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should learn about the 6 warning signs we've spotted with Recce Pharmaceuticals (including 2 which can't be ignored) .

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap 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 Australian 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com