Those who invested in Axsome Therapeutics (NASDAQ:AXSM) five years ago are up 246%

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%. For example, the Axsome Therapeutics, Inc. (NASDAQ:AXSM) share price has soared 246% in the last half decade. Most would be very happy with that. Also pleasing for shareholders was the 14% gain in the last three months. But this could be related to the strong market, which is up 8.2% in the last three months.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

Check out our latest analysis for Axsome Therapeutics

Axsome Therapeutics isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

For the last half decade, Axsome Therapeutics can boast revenue growth at a rate of 87% 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 28% per year, compound, during the period. So it seems likely that buyers have paid attention to the strong revenue growth. To our minds that makes Axsome Therapeutics worth investigating - it may have its best days ahead.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Axsome Therapeutics is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

Axsome Therapeutics provided a TSR of 7.3% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 28% a year, over half a decade) look better. 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. Case in point: We've spotted 1 warning sign for Axsome Therapeutics you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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