Did Changing Sentiment Drive Pharmaxis's (ASX:PXS) Share Price Down A Worrying 67%?

Pharmaxis Ltd (ASX:PXS) shareholders should be happy to see the share price up 30% in the last month. But that's small comfort given the dismal price performance over the last year. During that time the share price has sank like a stone, descending 67%. It's not that amazing to see a bounce after a drop like that. Arguably, the fall was overdone.

Check out our latest analysis for Pharmaxis

Because Pharmaxis made a loss in the last twelve months, 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 fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In just one year Pharmaxis saw its revenue fall by 38%. That looks pretty grim, at a glance. The share price drop of 67% is understandable given the company doesn't have profits to boast of. Having said that, if growth is coming in the future, the stock may have better days ahead. We don't generally like to own companies with falling revenues and no profits, so we're pretty cautious of this one, at the moment.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

This free interactive report on Pharmaxis's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

We regret to report that Pharmaxis shareholders are down 67% for the year. Unfortunately, that's worse than the broader market decline of 11%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 11% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Pharmaxis better, we need to consider many other factors. Take risks, for example - Pharmaxis has 4 warning signs we think you should be aware of.

But note: Pharmaxis may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.