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Imagine Owning Diplomat Pharmacy (NYSE:DPLO) And Trying To Stomach The 82% Share Price Drop

Simply Wall St

It's nice to see the Diplomat Pharmacy, Inc. (NYSE:DPLO) share price up 11% in a week. But only the myopic could ignore the astounding decline over three years. Indeed, the share price is down a whopping 82% in the last three years. Arguably, the recent bounce is to be expected after such a bad drop. The thing to think about is whether the business has really turned around.

We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

Check out our latest analysis for Diplomat Pharmacy

Given that Diplomat Pharmacy 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last three years, Diplomat Pharmacy saw its revenue grow by 9.9% per year, compound. That's a fairly respectable growth rate. So it's hard to believe the share price decline of 44% per year is due to the revenue. It could be that the losses were much larger than expected. If you buy into companies that lose money then you always risk losing money yourself. Just don't lose the lesson.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

NYSE:DPLO Income Statement, October 18th 2019

Diplomat Pharmacy is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Diplomat Pharmacy in this interactive graph of future profit estimates.

A Different Perspective

Investors in Diplomat Pharmacy had a tough year, with a total loss of 75%, against a market gain of about 9.7%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 25% 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. Before spending more time on Diplomat Pharmacy it might be wise to click here to see if insiders have been buying or selling shares.

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.

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 editorial-team@simplywallst.com. 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.