Shareholders in Karyopharm Therapeutics (NASDAQ:KPTI) are in the red if they invested three years ago
For many investors, the main point of stock picking is to generate higher returns than the overall market. But the risk of stock picking is that you will likely buy under-performing companies. Unfortunately, that's been the case for longer term Karyopharm Therapeutics Inc. (NASDAQ:KPTI) shareholders, since the share price is down 48% in the last three years, falling well short of the market return of around 49%. And the ride hasn't got any smoother in recent times over the last year, with the price 42% lower in that time. Furthermore, it's down 33% in about a quarter. That's not much fun for holders.
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.
See our latest analysis for Karyopharm Therapeutics
Given that Karyopharm Therapeutics 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.
In the last three years, Karyopharm Therapeutics saw its revenue grow by 70% per year, compound. That is faster than most pre-profit companies. The share price drop of 14% per year over three years would be considered disappointing by many, so you might argue the company is getting little credit for its impressive revenue growth. It seems likely that actual growth fell short of shareholders' expectations. Still, with high hopes now tempered, now might prove to be an opportunity to buy.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Take a more thorough look at Karyopharm Therapeutics' financial health with this free report on its balance sheet.
A Different Perspective
While the broader market lost about 11% in the twelve months, Karyopharm Therapeutics shareholders did even worse, losing 42%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 8% 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. 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 5 warning signs with Karyopharm Therapeutics (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.
Of course Karyopharm Therapeutics may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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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