These days it’s easy to simply buy an index fund, and your returns should (roughly) match the market. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Mesoblast Limited (ASX:MSB) share price is 57% higher than it was a year ago, much better than the market return of around -15% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! On the other hand, longer term shareholders have had a tougher run, with the stock falling 12% in three years.
View our latest analysis for Mesoblast
Given that Mesoblast 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. Shareholders of unprofitable companies usually expect strong revenue growth. 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 year Mesoblast saw its revenue grow by 38%. That’s a fairly respectable growth rate. Buyers pushed the share price 57% in response, which isn’t unreasonable. If the company can maintain the revenue growth, the share price could go higher still. But it’s crucial to check profitability and cash flow before forming a view on the future.
The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
ASX:MSB Income Statement April 13th 2020
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling Mesoblast stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
We’re pleased to report that Mesoblast shareholders have received a total shareholder return of 57% over one year. Notably the five-year annualised TSR loss of 6.7% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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 Mesoblast that you should be aware of.
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 AU exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.
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