Investors bid Pharming Group (AMS:PHARM) up €89m despite increasing losses YoY, taking five-year CAGR to 7.8%

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. But more than that, you probably want to see it rise more than the market average. But Pharming Group N.V. (AMS:PHARM) has fallen short of that second goal, with a share price rise of 46% over five years, which is below the market return. Zooming in, the stock is up just 2.2% in the last year.

Since the stock has added €89m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Pharming Group

Given that Pharming Group didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. 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.

For the last half decade, Pharming Group can boast revenue growth at a rate of 5.1% per year. That's not a very high growth rate considering the bottom line. Like its revenue, its share price gained over the period. The increase of 8% per year probably reflects the modest revenue growth. It seems likely that we'll have to zoom in on the data, including profits, to understand if there is an opportunity here.

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

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

Pharming Group provided a TSR of 2.2% over the last twelve months. But that return falls short of the market. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 8% over five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. 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. Even so, be aware that Pharming Group is showing 1 warning sign in our investment analysis , you should know about...

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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Dutch 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.