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The simplest way to benefit from a rising market is to buy an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by Xencor, Inc. (NASDAQ:XNCR) shareholders over the last year, as the share price declined 35%. That's well below the market return of 2.8%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 0.6% in three years. Shareholders have had an even rougher run lately, with the share price down 13% in the last 90 days. However, one could argue that the price has been influenced by the general market, which is down 10% in the same timeframe.
With the stock having lost 4.0% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
Xencor isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Xencor grew its revenue by 93% over the last year. That's well above most other pre-profit companies. Given the revenue growth, the share price drop of 35% seems quite harsh. Our sympathies to shareholders who are now underwater. 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.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Xencor is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
Investors in Xencor had a tough year, with a total loss of 35%, against a market gain of about 2.8%. 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 5%, 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. To that end, you should learn about the 4 warning signs we've spotted with Xencor (including 1 which shouldn't be ignored) .
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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.