Investors bid Orexo (STO:ORX) up kr100m despite increasing losses YoY, taking one-year return to 53%
Passive investing in index funds can generate returns that roughly match the overall market. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Orexo AB (publ) (STO:ORX) share price is 53% higher than it was a year ago, much better than the market return of around 7.4% (not including dividends) in the same period. So that should have shareholders smiling. It is also impressive that the stock is up 43% over three years, adding to the sense that it is a real winner.
After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.
Orexo isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually desire strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.
Orexo actually shrunk its revenue over the last year, with a reduction of 8.8%. The stock is up 53% in that time, a fine performance given the revenue drop. To us that means that there isn't a lot of correlation between the past revenue performance and the share price, but a closer look at analyst forecasts and the bottom line may well explain a lot.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
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 Orexo has rewarded shareholders with a total shareholder return of 53% in the last twelve months. Notably the five-year annualised TSR loss of 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. 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. Take risks, for example - Orexo has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about.
But note: Orexo 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 Swedish 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.