Shareholders have faith in loss-making Sumitomo Pharma (TSE:4506) as stock climbs 37% in past week, taking one-year gain to 152%

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Sumitomo Pharma Co., Ltd. (TSE:4506) share price has soared 152% in the last 1 year. Most would be very happy with that, especially in just one year! In more good news, the share price has risen 52% in thirty days. Zooming out, the stock is actually down 23% in the last three years.

The past week has proven to be lucrative for Sumitomo Pharma investors, so let's see if fundamentals drove the company's one-year performance.

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Sumitomo Pharma 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. When a company doesn't make profits, we'd generally hope to see good 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, Sumitomo Pharma's revenue grew by 13%. That's not great considering the company is losing money. In contrast, the share price took off during the year, gaining 152%. We're happy that investors have made money, though we wonder if the increase will be sustained. We're not so sure that revenue growth is driving the market optimism about the stock.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

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

A Different Perspective

We're pleased to report that Sumitomo Pharma shareholders have received a total shareholder return of 152% over one year. There's no doubt those recent returns are much better than the TSR loss of 6% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Sumitomo Pharma you should know about.

But note: Sumitomo Pharma 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 Japanese 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.