Elanco Animal Health (NYSE:ELAN) investors are sitting on a loss of 53% if they invested three years ago
Elanco Animal Health Incorporated (NYSE:ELAN) shareholders should be happy to see the share price up 17% in the last month. Meanwhile over the last three years the stock has dropped hard. Tragically, the share price declined 53% in that time. Some might say the recent bounce is to be expected after such a bad drop. The rise has some hopeful, but turnarounds are often precarious.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for Elanco Animal Health
Elanco Animal Health isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Over three years, Elanco Animal Health grew revenue at 16% per year. That's a fairly respectable growth rate. So some shareholders would be frustrated with the compound loss of 15% per year. To be frank we're surprised to see revenue growth and share price growth diverge so strongly. It would be well worth taking a closer look at the company, to determine growth trends (and balance sheet strength).
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So it makes a lot of sense to check out what analysts think Elanco Animal Health will earn in the future (free profit forecasts).
A Different Perspective
Over the last year, Elanco Animal Health shareholders took a loss of 51%. In contrast the market gained about 16%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Shareholders have lost 15% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. 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. Take risks, for example - Elanco Animal Health has 2 warning signs we think you should be aware of.
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 American 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.
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