Intercept Pharmaceuticals, Inc. (NASDAQ:ICPT) shareholders should be happy to see the share price up 12% in the last quarter. But that is meagre solace in the face of the shocking decline over three years. In that time the share price has melted like a snowball in the desert, down 81%. So it sure is nice to see a bit of an improvement. But the more important question is whether the underlying business can justify a higher price still. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
Because Intercept 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last three years, Intercept Pharmaceuticals saw its revenue grow by 16% per year, compound. That's a fairly respectable growth rate. So it seems unlikely the 22% share price drop (each year) is entirely about the revenue. More likely, the market was spooked by the cost of that revenue. This is exactly why investors need to diversify - even when a loss making company grows revenue, it can fail to deliver for shareholders.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Intercept Pharmaceuticals is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Intercept Pharmaceuticals stock, you should check out this free report showing analyst consensus estimates for future profits.
A Different Perspective
While it's never nice to take a loss, Intercept Pharmaceuticals shareholders can take comfort that their trailing twelve month loss of 15% wasn't as bad as the market loss of around 21%. What is more upsetting is the 12% per annum loss investors have suffered over the last half decade. While the losses are slowing we doubt many shareholders are happy with the stock. It's always interesting to track share price performance over the longer term. But to understand Intercept Pharmaceuticals better, we need to consider many other factors. For example, we've discovered 3 warning signs for Intercept Pharmaceuticals (1 makes us a bit uncomfortable!) that you should be aware of before investing here.
If you are like me, then you will not want to miss this free list of growing companies that insiders are 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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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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