The Kazia Therapeutics Limited (ASX:KZA) share price is down a rather concerning 35% in the last month. But that doesn't change the fact that the returns over the last three years have been pleasing. After all, the share price is up a market-beating 62% in that time.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
Kazia Therapeutics wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Kazia Therapeutics' revenue trended up 95% each year over three years. That's well above most pre-profit companies. While the compound gain of 17% per year over three years is pretty good, you might argue it doesn't fully reflect the strong revenue growth. If that's the case, now might be the time to take a close look at Kazia Therapeutics. If the company is trending towards profitability then it could be very interesting.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
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. So it makes a lot of sense to check out what analysts think Kazia Therapeutics will earn in the future (free profit forecasts).
What about the Total Shareholder Return (TSR)?
We've already covered Kazia Therapeutics' share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Kazia Therapeutics hasn't been paying dividends, but its TSR of 69% exceeds its share price return of 62%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
Investors in Kazia Therapeutics had a tough year, with a total loss of 40%, against a market gain of about 5.3%. 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. Longer term investors wouldn't be so upset, since they would have made 10%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 4 warning signs for Kazia Therapeutics (1 doesn't sit too well with us) that you should be aware of.
Kazia Therapeutics is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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.