While not a mind-blowing move, it is good to see that the Cosmo Pharmaceuticals N.V. (VTX:COPN) share price has gained 10% in the last three months. But over the last three years we've seen a quite serious decline. Regrettably, the share price slid 53% in that period. So the improvement may be a real relief to some. The rise has some hopeful, but turnarounds are often precarious.
Given that Cosmo Pharmaceuticals didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. 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.
In the last three years Cosmo Pharmaceuticals saw its revenue shrink by 5.8% per year. That's not what investors generally want to see. With revenue in decline, and profit but a dream, we can understand why the share price has been declining at 22% per year. Having said that, if growth is coming in the future, now may be the low ebb for the company. We'd be pretty wary of this one until it makes a profit, because we don't specialize in finding turnaround situations.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
If you are thinking of buying or selling Cosmo Pharmaceuticals stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
While the broader market gained around 25% in the last year, Cosmo Pharmaceuticals shareholders lost 10%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 10% over the last half decade. We realise that Buffett 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. You could get a better understanding of Cosmo Pharmaceuticals's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
Of course Cosmo Pharmaceuticals may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CH exchanges.
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