Karyopharm Therapeutics (NASDAQ:KPTI) adds US$104m to market cap in the past 7 days, though investors from three years ago are still down 90%
It is a pleasure to report that the Karyopharm Therapeutics Inc. (NASDAQ:KPTI) is up 139% in the last quarter. But that is meagre solace in the face of the shocking decline over three years. Indeed, the share price is down a whopping 90% in the last three years. Arguably, the recent bounce is to be expected after such a bad drop. Of course the real question is whether the business can sustain a turnaround. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
On a more encouraging note the company has added US$104m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.
See our latest analysis for Karyopharm Therapeutics
Karyopharm Therapeutics isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last three years, Karyopharm Therapeutics saw its revenue grow by 16% per year, compound. That's a fairly respectable growth rate. So it's hard to believe the share price decline of 24% per year is due to the revenue. More likely, the market was spooked by the cost of that revenue. If you buy into companies that lose money then you always risk losing money yourself. Just don't lose the lesson.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
This free interactive report on Karyopharm Therapeutics' balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Karyopharm Therapeutics shareholders are down 49% for the year, but the market itself is up 20%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 13% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Karyopharm Therapeutics (at least 2 which shouldn't be ignored) , and understanding them should be part of your investment process.
But note: Karyopharm Therapeutics may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
