Is FibroGen's (NASDAQ:FGEN) 166% Share Price Increase Well Justified?

By
Simply Wall St
Published
February 26, 2021
NasdaqGS:FGEN

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%. One great example is FibroGen, Inc. (NASDAQ:FGEN) which saw its share price drive 166% higher over five years. It's also good to see the share price up 24% over the last quarter.

Check out our latest analysis for FibroGen

FibroGen wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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.

In the last 5 years FibroGen saw its revenue grow at 6.5% per year. That's a fairly respectable growth rate. We'd argue this growth has been reflected in the share price which has climbed at a rate of 22% per year over in that time. It's well worth monitoring the growth trend in revenue, because if growth accelerates, that might signal an opportunity. When a growth trend accelerates, be it in revenue or earnings, it can indicate an inflection point for the business, which is can often be an opportunity for investors.

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

earnings-and-revenue-growth
NasdaqGS:FGEN Earnings and Revenue Growth February 26th 2021

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. So it makes a lot of sense to check out what analysts think FibroGen will earn in the future (free profit forecasts).

A Different Perspective

FibroGen provided a TSR of 23% over the last twelve months. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 22% over half a decade This suggests the company might be improving over time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 3 warning signs for FibroGen that you should be aware of before investing here.

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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This article by Simply Wall St is general in nature. 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.
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