Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL) shareholders should be happy to see the share price up 23% in the last week. But don't envy holders -- looking back over 5 years the returns have been really bad. In fact, the share price has declined rather badly, down some 57% in that time. Some might say the recent bounce is to be expected after such a bad drop. But it could be that the fall was overdone.
Because Rigel Pharmaceuticals made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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.
Over five years, Rigel Pharmaceuticals grew its revenue at 28% per year. That's better than most loss-making companies. In contrast, the share price is has averaged a loss of 15% per year - that's quite disappointing. This could mean high expectations have been tempered, potentially because investors are looking to the bottom line. If you think the company can keep up its revenue growth, you'd have to consider the possibility that there's an opportunity here.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
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 Rigel Pharmaceuticals in this interactive graph of future profit estimates.
A Different Perspective
We regret to report that Rigel Pharmaceuticals shareholders are down 28% for the year. Unfortunately, that's worse than the broader market decline of 4.0%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 15% 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. 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 - Rigel Pharmaceuticals 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 US exchanges.
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