Optimism for Panacea Biotec (NSE:PANACEABIO) has grown this past week, despite one-year decline in earnings

If you want to compound wealth in the stock market, you can do so by buying an index fund. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Panacea Biotec Limited (NSE:PANACEABIO) share price is 34% higher than it was a year ago, much better than the market return of around 26% (not including dividends) in the same period. So that should have shareholders smiling. Unfortunately the longer term returns are not so good, with the stock falling 18% in the last three years.

Since it's been a strong week for Panacea Biotec shareholders, let's have a look at trend of the longer term fundamentals.

Check out our latest analysis for Panacea Biotec

We don't think that Panacea Biotec's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.

Panacea Biotec grew its revenue by 0.8% last year. That's not great considering the company is losing money. In keeping with the revenue growth, the share price gained 34% in that time. While not a huge gain tht seems pretty reasonable. It could be worth keeping an eye on this one, especially if growth accelerates.

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

Take a more thorough look at Panacea Biotec's financial health with this free report on its balance sheet.

A Different Perspective

It's nice to see that Panacea Biotec shareholders have received a total shareholder return of 34% over the last year. That gain is better than the annual TSR over five years, which is 4%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Panacea Biotec , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.