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Lannett Company, Inc. (NYSE:LCI) shareholders should be happy to see the share price up 27% in the last month. But will that repair the damage for the weary investors who have owned this stock as it declined over half a decade? Probably not. In fact, the share price has tumbled down a mountain to land 84% lower after that period. While the recent increase might be a green shoot, we're certainly hesitant to rejoice. The important question is if the business itself justifies a higher share price in the long term.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
Lannett Company 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 half decade, Lannett Company saw its revenue increase by 9.9% per year. That's a pretty good rate for a long time period. So it is unexpected to see the stock down 31% per year in the last five years. The market can be a harsh master when your company is losing money and revenue growth disappoints.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
It's good to see that Lannett Company has rewarded shareholders with a total shareholder return of 20% in the last twelve months. That certainly beats the loss of about 31% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand Lannett Company better, we need to consider many other factors. Take risks, for example - Lannett Company has 3 warning signs (and 2 which are a bit unpleasant) we think you should know about.
Lannett Company is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
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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