U.S. markets closed
  • S&P 500

    3,825.33
    +39.95 (+1.06%)
     
  • Dow 30

    31,097.26
    +321.86 (+1.05%)
     
  • Nasdaq

    11,127.84
    +99.14 (+0.90%)
     
  • Russell 2000

    1,727.76
    +19.77 (+1.16%)
     
  • Crude Oil

    108.53
    +0.10 (+0.09%)
     
  • Gold

    1,810.20
    +8.70 (+0.48%)
     
  • Silver

    19.84
    +0.18 (+0.91%)
     
  • EUR/USD

    1.0437
    +0.0011 (+0.10%)
     
  • 10-Yr Bond

    2.8890
    -0.0830 (-2.79%)
     
  • GBP/USD

    1.2107
    +0.0004 (+0.04%)
     
  • USD/JPY

    135.1870
    +0.0120 (+0.01%)
     
  • BTC-USD

    19,258.99
    -3.29 (-0.02%)
     
  • CMC Crypto 200

    420.84
    +0.70 (+0.17%)
     
  • FTSE 100

    7,168.65
    -0.63 (-0.01%)
     
  • Nikkei 225

    25,935.62
    -457.38 (-1.73%)
     

PLx Pharma (NASDAQ:PLXP) investors are sitting on a loss of 32% if they invested a year ago

  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Investors in PLx Pharma Inc. (NASDAQ:PLXP) have tasted that bitter downside in the last year, as the share price dropped 32%. That contrasts poorly with the market return of 3.7%. On the other hand, the stock is actually up 22% over three years. In the last ninety days we've seen the share price slide 45%.

Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.

Check out our latest analysis for PLx Pharma

Given that PLx Pharma didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

PLx Pharma grew its revenue by 12,079% over the last year. That's a strong result which is better than most other loss making companies. The share price drop of 32% over twelve months would be considered disappointing by many, so you might argue the company is getting little credit for its impressive revenue growth. Prima facie, revenue growth like that should be a good thing, so it's worth checking whether losses have stabilized. Our monkey brains haven't evolved to think exponentially, so humans do tend to underestimate companies that have exponential growth.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
earnings-and-revenue-growth

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. You can see what analysts are predicting for PLx Pharma in this interactive graph of future profit estimates.

A Different Perspective

PLx Pharma shareholders are down 32% for the year, but the broader market is up 3.7%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Investors are up over three years, booking 7% per year, much better than the more recent returns. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with PLx Pharma (at least 1 which is significant) , and understanding them should be part of your investment process.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.