Taking the occasional loss comes part and parcel with investing on the stock market. Anyone who held Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI) over the last year knows what a loser feels like. In that relatively short period, the share price has plunged 68%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 28% in three years. More recently, the share price has dropped a further 61% in a month.
Because Spectrum Pharmaceuticals 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. 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.
In the last twelve months, Spectrum Pharmaceuticals increased its revenue by 283%. That's well above most other pre-profit companies. Meanwhile, the share price slid 68%. Typically a growth stock like this will be volatile, with some shareholders concerned about the red ink on the bottom line (that is, the losses). Generally speaking investors would consider a stock like this less risky once it turns a profit. But when do you think that will happen?
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
While the broader market gained around 27% in the last year, Spectrum Pharmaceuticals shareholders lost 68%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 14% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Case in point: We've spotted 3 warning signs for Spectrum Pharmaceuticals you should be aware of.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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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