Long term investing can be life changing when you buy and hold the truly great businesses. And we've seen some truly amazing gains over the years. To wit, the Axsome Therapeutics, Inc. (NASDAQ:AXSM) share price has soared 906% over five years. If that doesn't get you thinking about long term investing, we don't know what will. On top of that, the share price is up 57% in about a quarter. Anyone who held for that rewarding ride would probably be keen to talk about it.
While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.
Given that Axsome 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. 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 Axsome Therapeutics saw its revenue grow at 96% per year. Even measured against other revenue-focussed companies, that's a good result. Arguably, this is well and truly reflected in the strong share price gain of 59%(per year) over the same period. Despite the strong run, top performers like Axsome Therapeutics have been known to go on winning for decades. On the face of it, this looks lke a good opportunity, although we note sentiment seems very positive already.
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. You can see what analysts are predicting for Axsome Therapeutics in this interactive graph of future profit estimates.
A Different Perspective
We're pleased to report that Axsome Therapeutics shareholders have received a total shareholder return of 39% over one year. However, the TSR over five years, coming in at 59% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. It's always interesting to track share price performance over the longer term. But to understand Axsome Therapeutics better, we need to consider many other factors. Even so, be aware that Axsome Therapeutics is showing 1 warning sign in our investment analysis , you should know about...
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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.