If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But the last three years have been particularly tough on longer term Sorrento Therapeutics, Inc. (NASDAQ:SRNE) shareholders. Regrettably, they have had to cope with a 67% drop in the share price over that period. And over the last year the share price fell 57%, so we doubt many shareholders are delighted. Furthermore, it's down 43% in about a quarter. That's not much fun for holders. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
Because Sorrento Therapeutics is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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.
In the last three years, Sorrento Therapeutics saw its revenue grow by 23% per year, compound. That's well above most other pre-profit companies. In contrast, the share price is down 31% compound, over three years - disappointing by most standards. This could mean hype has come out of the stock because the losses are concerning investors. But a share price drop of that magnitude could well signal that the market is overly negative on the stock.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Take a more thorough look at Sorrento Therapeutics's financial health with this free report on its balance sheet.
A Different Perspective
Investors in Sorrento Therapeutics had a tough year, with a total loss of 57%, against a market gain of about 3.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 17% over the last half decade. 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. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
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.
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