While not a mind-blowing move, it is good to see that the ADMA Biologics, Inc. (NASDAQ:ADMA) share price has gained 27% in the last three months. But spare a thought for the long term holders, who have held the stock as it bled value over the last five years. In fact, the share price has tumbled down a mountain to land 72% lower after that period. While the recent increase might be a green shoot, we're certainly hesitant to rejoice. The important question is if the business itself justifies a higher share price in the long term.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
ADMA Biologics 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last half decade, ADMA Biologics saw its revenue increase by 37% per year. That's well above most other pre-profit companies. So it's not at all clear to us why the share price sunk 11% throughout that time. It could be that the stock was over-hyped before. While there might be an opportunity here, you'd want to take a close look at the balance sheet strength.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. If you are thinking of buying or selling ADMA Biologics stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
While the broader market gained around 15% in the last year, ADMA Biologics shareholders lost 32%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 11% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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 2 warning signs for ADMA Biologics (1 is a bit unpleasant!) that you should be aware of before investing here.
ADMA Biologics is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider 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. 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.