AcelRx Pharmaceuticals, Inc. (NASDAQ:ACRX) shareholders will doubtless be very grateful to see the share price up 31% in the last quarter. But if you look at the last five years the returns have not been good. In fact, the share price is down 47%, which falls well short of the return you could get by buying an index fund.
Because AcelRx Pharmaceuticals made a loss in the last twelve months, 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 it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Over half a decade AcelRx Pharmaceuticals reduced its trailing twelve month revenue by 46% for each year. That puts it in an unattractive cohort, to put it mildly. On the face of it we'd posit the share price fall of 8% compound, over five years is well justified by the fundamental deterioration. This loss means the stock shareholders are probably pretty annoyed. It is possible for businesses to bounce back but as Buffett says, 'turnarounds seldom turn'.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We consider it positive that insiders have made significant purchases in the last year. 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 AcelRx Pharmaceuticals
A Different Perspective
AcelRx Pharmaceuticals shareholders are up 31% for the year. Unfortunately this falls short of the market return. But at least that's still a gain! Over five years the TSR has been a reduction of 8% per year, over five years. It could well be that the business is stabilizing. It's always interesting to track share price performance over the longer term. But to understand AcelRx Pharmaceuticals better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for AcelRx Pharmaceuticals (of which 1 is a bit concerning!) you should know about.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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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