Shareholders in Legend Biotech (NASDAQ:LEGN) are in the red if they invested a year ago
One simple way to benefit from a rising market is to buy an index fund. But in any given year a good portion of stocks will fall short of that. For example, that's what happened with Legend Biotech Corporation (NASDAQ:LEGN) over the last year - it's share price is down 25% versus a market decline of 21%. We wouldn't rush to judgement on Legend Biotech because we don't have a long term history to look at. It's down 27% in about a quarter.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
Check out our latest analysis for Legend Biotech
Given that Legend Biotech 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. 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 year Legend Biotech saw its revenue grow by 48%. That's a strong result which is better than most other loss making companies. The share price drop of 25% over twelve months would be considered disappointing by many, so you might argue the company is getting little credit for its impressive revenue growth. On the bright side, if this company is moving profits in the right direction, top-line growth like that could be an opportunity. Our monkey brains haven't evolved to think exponentially, so humans do tend to underestimate companies that have exponential growth.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
This free interactive report on Legend Biotech's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Legend Biotech shareholders are down 25% for the year, even worse than the market loss of 21%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. Notably, the loss over the last year isn't as bad as the 27% drop in the last three months. This probably signals that the business has recently disappointed shareholders - it will take time to win them back. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Legend Biotech has 2 warning signs we think you should be aware of.
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.
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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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