Over the last month the Pieris Pharmaceuticals, Inc. (NASDAQ:PIRS) has been much stronger than before, rebounding by 35%. But that doesn’t help the fact that the three year return is less impressive. Truth be told the share price declined 19% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.
Pieris Pharmaceuticals isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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.
In the last three years, Pieris Pharmaceuticals saw its revenue grow by 43% per year, compound. That’s well above most other pre-profit companies. While its revenue increased, the share price dropped at a rate of 6.7% per year. That seems like an unlucky result for holders. It seems likely that actual growth fell short of shareholders’ expectations. Before considering a purchase, investors should consider how quickly expenses are growing, relative to revenue.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
While the broader market gained around 12% in the last year, Pieris Pharmaceuticals shareholders lost 15%. 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. On the bright side, long term shareholders have made money, with a gain of 1.6% per year over half a decade. 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. Even so, be aware that Pieris Pharmaceuticals is showing 4 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable…
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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. 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. Thank you for reading.