Trevena, Inc. (NASDAQ:TRVN) shareholders will doubtless be very grateful to see the share price up 164% in the last quarter. But that is meagre solace in the face of the shocking decline over three years. Indeed, the share price is down a whopping 83% in the last three years. So it sure is nice to see a big of an improvement. Of course the real question is whether the business can sustain a turnaround.
We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
Given that Trevena 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over the last three years, Trevena's revenue dropped 22% per year. That's definitely a weaker result than most pre-profit companies report. The swift share price decline at an annual compound rate of 44%, reflects this weak fundamental performance. Never forget that loss making companies with falling revenue can and do cause losses for everyday investors. There is a good reason that investors often describe buying a sharply falling stock price as 'trying to catch a falling knife'. Think about it.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
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. So it makes a lot of sense to check out what analysts think Trevena will earn in the future (free profit forecasts)
A Different Perspective
While the broader market gained around 9.9% in the last year, Trevena shareholders lost 3.1%. 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. Unfortunately, longer term shareholders are suffering worse, given the loss of 22% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.
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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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.