Taking the occasional loss comes part and parcel with investing on the stock market. Unfortunately, shareholders of Starpharma Holdings Limited (ASX:SPL) have suffered share price declines over the last year. To wit the share price is down 56% in that time. Even if you look out three years, the returns are still disappointing, with the share price down49% in that time. Shareholders have had an even rougher run lately, with the share price down 25% in the last 90 days. However, one could argue that the price has been influenced by the general market, which is down 15% in the same timeframe.
Now let’s have a look at the company’s fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
Because Starpharma Holdings 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. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last year Starpharma Holdings saw its revenue grow by 125%. That’s a strong result which is better than most other loss making companies. Meanwhile, the share price slid 56%. This could mean hype has come out of the stock because the bottom line is concerning investors. We’d definitely consider it a positive if the company is trending towards profitability. If you can see that happening, then perhaps consider adding this stock to your watchlist.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Starpharma Holdings’ earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
We regret to report that Starpharma Holdings shareholders are down 56% for the year. Unfortunately, that’s worse than the broader market decline of 6.9%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there’s a good opportunity. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.1% over the last half decade. We realise that Baron Rothschild has said investors should “buy when there is blood on the streets”, but we caution that investors should first be sure they are buying a high quality business. 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 3 warning signs for Starpharma Holdings (1 can’t be ignored) that you should be aware of.
Starpharma Holdings is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing 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 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.