As an investor its worth striving to ensure your overall portfolio beats the market average. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term Heron Therapeutics, Inc. (NASDAQ:HRTX) shareholders have had that experience, with the share price dropping 46% in three years, versus a market return of about 63%.
Given that Heron Therapeutics 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over three years, Heron Therapeutics grew revenue at 33% per year. That's well above most other pre-profit companies. The share price drop of 13% per year over three years would be considered disappointing by many, so you might argue the company is getting little credit for its impressive revenue growth. It's possible that the prior share price assumed unrealistically high future growth. Before considering a purchase, investors should consider how quickly expenses are growing, relative to revenue.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
If you are thinking of buying or selling Heron Therapeutics stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Heron Therapeutics provided a TSR of 12% over the last twelve months. But that return falls short of the market. But at least that's still a gain! Over five years the TSR has been a reduction of 5% per year, over five years. So this might be a sign the business has turned its fortunes around. It's always interesting to track share price performance over the longer term. But to understand Heron Therapeutics better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Heron Therapeutics you should know about.
Of course Heron Therapeutics may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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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