There's no doubt that investing in the stock market is a truly brilliant way to build wealth. But if when you choose to buy stocks, some of them will be below average performers. Over the last year the Mabpharm Limited (HKG:2181) share price is up 14%, but that's less than the broader market return. Mabpharm hasn't been listed for long, so it's still not clear if it is a long term winner.
Mabpharm wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. 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.
Over the last twelve months, Mabpharm's revenue grew by 35%. We respect that sort of growth, no doubt. The share price gain of 14% seems pretty muted, considering the growth. Arguably, the market (previously) expected stronger growth from the company. But this one could be a worth watching - a maiden profit would likely catch the market's attention.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Mabpharm shareholders have gained 14% for the year. The bad news is that's no better than the average market return, which was roughly 26%. The last three months haven't been great for shareholder returns, since the share price has trailed the market by 13% in the last three months. But a weak quarter certainly doesn't diminish the longer-term achievements of the business. 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. For instance, we've identified 1 warning sign for Mabpharm that you should be aware of.
Of course Mabpharm may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
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