It's easy to match the overall market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Investors in Athersys, Inc. (NASDAQ:ATHX) have tasted that bitter downside in the last year, as the share price dropped 36%. That's disappointing when you consider the market returned 14%. However, the longer term returns haven't been so bad, with the stock down 16% in the last three years.
Athersys isn't a profitable company, so 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. 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 just one year Athersys saw its revenue fall by 57%. That looks like a train-wreck result to investors far and wide. No surprise, then, that the share price fell 36% over the year. We would want to see improvements in the core business, and diminishing losses, before getting too excited about this one.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
This free interactive report on Athersys's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Athersys shareholders are down 36% for the year, but the market itself is up 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 3.4% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. You could get a better understanding of Athersys's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.