The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on the bright side, you can make far more than 100% on a really good stock. For instance, the price of Merus N.V. (NASDAQ:MRUS) stock is up an impressive 214% over the last five years. On the other hand, the stock price has retraced 4.8% in the last week. It may be that the recent financial results disappointed, so check out the latest revenue and profit numbers on in our company report.'

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.

Merus isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally hope to see good revenue growth. 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.

For the last half decade, Merus can boast revenue growth at a rate of 5.8% per year. That's not a very high growth rate considering the bottom line. In comparison, the share price rise of 26% per year over the last half a decade is pretty impressive. Shareholders should be pretty happy with that, although interested investors might want to examine the financial data more closely to see if the gains are really justified. It may be that the market is pretty optimistic about Merus.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Merus is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think Merus will earn in the future (free analyst consensus estimates)

A Different Perspective

It's good to see that Merus has rewarded shareholders with a total shareholder return of 109% in the last twelve months. That gain is better than the annual TSR over five years, which is 26%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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 instance, we've identified 2 warning signs for Merus that you should be aware of.

If you are like me, then you will not want to miss this free list of undervalued small caps 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 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.