It’s easy to match the overall 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. Investors in Athersys, Inc. (NASDAQ:ATHX) have tasted that bitter downside in the last year, as the share price dropped 32%. That falls noticeably short of the market return of around 13%. Longer term shareholders haven’t suffered as badly, since the stock is down a comparatively less painful 25% in three years. Unhappily, the share price slid 1.6% in the last week.
Because Athersys is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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.
In just one year Athersys saw its revenue fall by 71%. That looks like a train-wreck result to investors far and wide. No surprise, then, that the share price fell 32% over the year. It’s always work digging deeper, but we’d probably need to see a strong balance sheet and bottom line improvements to get interested in this one.
The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Investors in Athersys had a tough year, with a total loss of 32%, against a market gain of about 13%. 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 1.5% 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. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
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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