The nature of investing is that you win some, and you lose some. Unfortunately, shareholders of Open Orphan plc (LON:ORPH) have suffered share price declines over the last year. The share price is down a hefty 60% in that time. Open Orphan may have better days ahead, of course; we've only looked at a one year period. On top of that, the share price is down 13% in the last week. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
Since Open Orphan has shed UK£13m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
Open Orphan wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last year Open Orphan saw its revenue grow by 89%. That's a strong result which is better than most other loss making companies. Meanwhile, the share price slid 60%. This could mean hype has come out of the stock because the bottom line is concerning investors. We'd definitely consider it a positive if the company is trending towards profitability. If you can see that happening, then perhaps consider adding this stock to your watchlist.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling Open Orphan stock, you should check out this free report showing analyst profit forecasts.
What about the Total Shareholder Return (TSR)?
We've already covered Open Orphan's share price action, but we should also mention its total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. We note that Open Orphan's TSR, at -56% is higher than its share price return of -60%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
While Open Orphan shareholders are down 56% for the year, the market itself is up 1.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 3.4% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. 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. Case in point: We've spotted 1 warning sign for Open Orphan 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 GB 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.