Investors one-year losses grow to 57% as the stock sheds US$240m this past week
Investing in stocks comes with the risk that the share price will fall. And unfortunately for Denali Therapeutics Inc. (NASDAQ:DNLI) shareholders, the stock is a lot lower today than it was a year ago. In that relatively short period, the share price has plunged 57%. On the other hand, the stock is actually up 2.6% over three years. Furthermore, it's down 29% in about a quarter. That's not much fun for holders.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
Check out our latest analysis for Denali Therapeutics
Because Denali Therapeutics 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. 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.
In just one year Denali Therapeutics saw its revenue fall by 86%. That looks like a train-wreck result to investors far and wide. Arguably, the market has responded appropriately to this performance by sending the share price down 57% in the same time period. Buying shares in loss making companies with falling revenue is often called speculation, not investing. This company will really need to improve on the numbers before we get excited about it.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Denali Therapeutics is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Denali Therapeutics in this interactive graph of future profit estimates.
A Different Perspective
Denali Therapeutics shareholders are down 57% for the year, falling short of the market return. Meanwhile, the broader market slid about 6.9%, likely weighing on the stock. Fortunately the longer term story is brighter, with total returns averaging about 0.9% per year over three years. Sometimes when a good quality long term winner has a weak period, it's turns out to be an opportunity, but you really need to be sure that the quality is there. 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. To that end, you should be aware of the 3 warning signs we've spotted with Denali Therapeutics .
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.
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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.
