Retrophin, Inc. (NASDAQ:RTRX) shareholders should be happy to see the share price up 11% in the last quarter. But that doesn't change the fact that the returns over the last year have been less than pleasing. After all, the share price is down 46% in the last year, significantly under-performing the market.
Because Retrophin is loss-making, 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Retrophin grew its revenue by 6.0% over the last year. While that may seem decent it isn't great considering the company is still making a loss. Given this lacklustre revenue growth, the share price drop of 46% seems pretty appropriate. It's important not to lose sight of the fact that profitless companies must grow. So remember, if you buy a profitless company then you risk being a profitless investor.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Take a more thorough look at Retrophin's financial health with this free report on its balance sheet.
A Different Perspective
Investors in Retrophin had a tough year, with a total loss of 46%, against a market gain of about 20%. 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. Longer term investors wouldn't be so upset, since they would have made 0.6%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Before spending more time on Retrophin it might be wise to click here to see if insiders have been buying or selling shares.
But note: Retrophin may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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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