The Vericel Corporation (NASDAQ:VCEL) share price has had a bad week, falling 11%. But that doesn't change the fact that shareholders have received really good returns over the last five years. In fact, the share price is 173% higher today. We think it's more important to dwell on the long term returns than the short term returns. The more important question is whether the stock is too cheap or too expensive today.
Although Vericel has shed US$267m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
Given that Vericel only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.
In the last 5 years Vericel saw its revenue grow at 14% per year. That's a fairly respectable growth rate. We'd argue this growth has been reflected in the share price which has climbed at a rate of 22% per year over in that time. It's well worth monitoring the growth trend in revenue, because if growth accelerates, that might signal an opportunity. Accelerating growth can be a sign of an inflection point - and could indicate profits lie ahead. Worth watching 100%
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We know that Vericel has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Vericel in this interactive graph of future profit estimates.
A Different Perspective
Vericel provided a TSR of 19% over the last twelve months. But that was short of the market average. On the bright side, the longer term returns (running at about 22% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Vericel you should know about.
Of course Vericel may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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.