Investors in Arcutis Biotherapeutics (NASDAQ:ARQT) from three years ago are still down 40%, even after 5.0% gain this past week
As an investor its worth striving to ensure your overall portfolio beats the market average. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT) shareholders have had that experience, with the share price dropping 40% in three years, versus a market return of about 36%. But it's up 5.0% in the last week. Less than a week ago Arcutis Biotherapeutics announced its financial results; you can catch up on the most recent data by reading our company report.
While the last three years has been tough for Arcutis Biotherapeutics shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.
View our latest analysis for Arcutis Biotherapeutics
Arcutis Biotherapeutics wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally expect to see good 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 three years, Arcutis Biotherapeutics grew revenue at 167% per year. That's well above most other pre-profit companies. While its revenue increased, the share price dropped at a rate of 12% per year. That seems like an unlucky result for holders. It's possible that the prior share price assumed unrealistically high future growth. Before considering a purchase, investors should consider how quickly expenses are growing, relative to revenue.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
This free interactive report on Arcutis Biotherapeutics' balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Arcutis Biotherapeutics shareholders may not have made money over the last year, but their total loss of 5.5% isn't as bad as the market loss of around 5.5%. The one-year return is also not as bad as the 12% per annum loss investors have suffered over the last three years. It could well be that the business has begun to stabilize, though the recent returns are hardly impressive. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Arcutis Biotherapeutics , and understanding them should be part of your investment process.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
