TherapeuticsMD, Inc. (NASDAQ:TXMD) shareholders will doubtless be very grateful to see the share price up 51% 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 17%, which falls well short of the return you could get by buying an index fund.
TherapeuticsMD isn’t a profitable company, so 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over five years, TherapeuticsMD grew its revenue at 5.8% per year. That’s not a very high growth rate considering it doesn’t make profits. Given this fairly low revenue growth (and lack of profits), it’s not particularly surprising to see the stock down 3.7% (annualized) in the same time frame. Investors should consider how bad the losses are, and whether the company can make it to profitability with ease. Shareholders will want the company to approach profitability if it can’t grow revenue any faster.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
It’s good to see that TherapeuticsMD has rewarded shareholders with a total shareholder return of 5.2% in the last twelve months. Notably the five-year annualised TSR loss of 3.7% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
But note: TherapeuticsMD may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).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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