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Long term investing works well, but it doesn't always work for each individual stock. It hits us in the gut when we see fellow investors suffer a loss. Anyone who held Exagen Inc. (NASDAQ:XGN) for five years would be nursing their metaphorical wounds since the share price dropped 84% in that time. The falls have accelerated recently, with the share price down 17% in the last three months. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
View our latest analysis for Exagen
Exagen 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. 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.
Over five years, Exagen grew its revenue at 7.2% per year. That's a fairly respectable growth rate. So the stock price fall of 13% per year seems pretty steep. The truth is that the growth might be below expectations, and investors are probably worried about the continual losses.
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. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free report showing analyst forecasts should help you form a view on Exagen
A Different Perspective
It's good to see that Exagen has rewarded shareholders with a total shareholder return of 71% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 13% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. 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. Case in point: We've spotted 3 warning signs for Exagen you should be aware of, and 1 of them is potentially serious.