For us, stock picking is in large part the hunt for the truly magnificent stocks. You won't get it right every time, but when you do, the returns can be truly splendid. One bright shining star stock has been Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM), which is 370% higher than three years ago. We note the stock price is up 1.6% in the last seven days.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

Check out our latest analysis for Rhythm Pharmaceuticals

Because Rhythm Pharmaceuticals made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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.

Over the last three years Rhythm Pharmaceuticals has grown its revenue at 88% annually. That's much better than most loss-making companies. And it's not just the revenue that is taking off. The share price is up 68% per year in that time. It's always tempting to take profits after a share price gain like that, but high-growth companies like Rhythm Pharmaceuticals can sometimes sustain strong growth for many years. In fact, it might be time to put it on your watchlist, if you're not already familiar with the stock.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Rhythm Pharmaceuticals is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

Rhythm Pharmaceuticals shareholders are up 21% for the year. But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 20% over half a decade It is possible that returns will improve along with the business fundamentals. 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 1 warning sign for Rhythm Pharmaceuticals that you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.