As every investor would know, not every swing hits the sweet spot. But you want to avoid the really big losses like the plague. So consider, for a moment, the misfortune of Outlook Therapeutics, Inc. (NASDAQ:OTLK) investors who have held the stock for three years as it declined a whopping 98%. That'd be enough to cause even the strongest minds some disquiet. The more recent news is of little comfort, with the share price down 94% in a year. Furthermore, it's down 56% in about a quarter. That's not much fun for holders. However, one could argue that the price has been influenced by the general market, which is down 26% in the same timeframe.
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.
Given that Outlook Therapeutics 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. 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 three years, Outlook Therapeutics grew revenue at 35% per year. That is faster than most pre-profit companies. So why has the share priced crashed 72% per year, in the same time? You'd want to take a close look at the balance sheet, as well as the losses. Ultimately, revenue growth doesn't amount to much if the business can't scale well. Unless the balance sheet is strong, the company might have to raise capital.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
If you are thinking of buying or selling Outlook Therapeutics stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
The last twelve months weren't great for Outlook Therapeutics shares, which performed worse than the market, costing holders 94%. The market shed around 16%, no doubt weighing on the stock price. The three-year loss of 72% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. It's always interesting to track share price performance over the longer term. But to understand Outlook Therapeutics better, we need to consider many other factors. For instance, we've identified 4 warning signs for Outlook Therapeutics (2 are concerning) that 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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