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Some Zymeworks Inc. (NYSE:ZYME) shareholders are probably rather concerned to see the share price fall 40% over the last three months. On the other hand the share price is higher than it was three years ago. However, it's unlikely many shareholders are elated with the share price gain of 72% over that time, given the rising market.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
Zymeworks isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Zymeworks actually saw its revenue drop by 38% per year over three years. The modest share price gain of 20% per year suggests holders are sanguine about the falling revenue. As a general rule we don't like it when a loss-making company isn't even growing revenue.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Zymeworks is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
The last twelve months weren't great for Zymeworks shares, which cost holders 58%, while the market was up about 30%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Fortunately the longer term story is brighter, with total returns averaging about 20% 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. It's always interesting to track share price performance over the longer term. But to understand Zymeworks better, we need to consider many other factors. For instance, we've identified 3 warning signs for Zymeworks (1 is a bit unpleasant) 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.
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.
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