Long term investing is the way to go, but that doesn't mean you should hold every stock forever. We really hate to see fellow investors lose their hard-earned money. For example, we sympathize with anyone who was caught holding AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG) during the five years that saw its share price drop a whopping 74%. And it's not just long term holders hurting, because the stock is down 40% in the last year. Contrary to the longer term story, the last month has been good for stockholders, with a share price gain of 8.4%. But this could be related to good market conditions, with stocks up around 3.4% during the period.
Given that AMAG Pharmaceuticals 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over five years, AMAG Pharmaceuticals grew its revenue at 12% per year. That's a pretty good rate for a long time period. So the stock price fall of 24% per year seems pretty steep. The truth is that the growth might be below expectations, and investors are probably worried about the continual losses.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
Investors in AMAG Pharmaceuticals had a tough year, with a total loss of 40%, against a market gain of about 11%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 24% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of AMAG Pharmaceuticals by clicking this link.
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.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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