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Shareholders in Rigel Pharmaceuticals (NASDAQ:RIGL) are in the red if they invested a year ago

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Investors can approximate the average market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL) shareholders over the last year, as the share price declined 36%. That contrasts poorly with the market return of 15%. The silver lining (for longer term investors) is that the stock is still 16% higher than it was three years ago. Furthermore, it's down 27% in about a quarter. That's not much fun for holders.

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 Rigel Pharmaceuticals

Rigel Pharmaceuticals 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. Shareholders of unprofitable companies usually expect strong 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.

Rigel Pharmaceuticals grew its revenue by 40% over the last year. We think that is pretty nice growth. Unfortunately that wasn't good enough to stop the share price dropping 36%. This implies the market was expecting better growth. However, that's in the past now, and it's the future that matters most.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

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

This free interactive report on Rigel Pharmaceuticals' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Investors in Rigel Pharmaceuticals had a tough year, with a total loss of 36%, against a market gain of about 15%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 1.9%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Case in point: We've spotted 1 warning sign for Rigel Pharmaceuticals you should be aware of.

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.

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.