Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. For example, the Checkpoint Therapeutics, Inc. (NASDAQ:CKPT) share price is down 25% in the last year. That falls noticeably short of the market return of around 15%. Because Checkpoint Therapeutics hasn't been listed for many years, the market is still learning about how the business performs. In the last ninety days we've seen the share price slide 34%.
Checkpoint Therapeutics isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last twelve months, Checkpoint Therapeutics increased its revenue by 286%. That's a strong result which is better than most other loss making companies. Given the revenue growth, the share price drop of 25% seems quite harsh. Our sympathies to shareholders who are now underwater. On the bright side, if this company is moving profits in the right direction, top-line growth like that could be an opportunity. Our monkey brains haven't evolved to think exponentially, so humans do tend to underestimate companies that have exponential growth.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
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. You can see what analysts are predicting for Checkpoint Therapeutics in this interactive graph of future profit estimates.
A Different Perspective
While Checkpoint Therapeutics shareholders are down 25% for the year, the market itself is up 15%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Notably, the loss over the last year isn't as bad as the 34% drop in the last three months. This probably signals that the business has recently disappointed shareholders - it will take time to win them back. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
Checkpoint 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 US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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.