Further weakness as InDex Pharmaceuticals Holding (STO:INDEX) drops 13% this week, taking three-year losses to 56%

By
Simply Wall St
Published
February 25, 2022
OM:INDEX
Source: Shutterstock

The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the last three years have been particularly tough on longer term InDex Pharmaceuticals Holding AB (publ) (STO:INDEX) shareholders. Sadly for them, the share price is down 83% in that time. And more recent buyers are having a tough time too, with a drop of 26% in the last year. Even worse, it's down 23% in about a month, which isn't fun at all. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

After losing 13% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

See our latest analysis for InDex Pharmaceuticals Holding

Given that InDex Pharmaceuticals Holding didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

Over three years, InDex Pharmaceuticals Holding grew revenue at 136% per year. That's well above most other pre-profit companies. So on the face of it we're really surprised to see the share price down 22% a year in the same time period. The share price makes us wonder if there is an issue with profitability. Sometimes fast revenue growth doesn't lead to profits. Unless the balance sheet is strong, the company might have to raise capital.

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

earnings-and-revenue-growth
OM:INDEX Earnings and Revenue Growth February 25th 2022

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

What about the Total Shareholder Return (TSR)?

We've already covered InDex Pharmaceuticals Holding's share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. InDex Pharmaceuticals Holding hasn't been paying dividends, but its TSR of -56% exceeds its share price return of -83%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

InDex Pharmaceuticals Holding shareholders are down 26% for the year, but the market itself is up 4.3%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 6% over the last half decade. 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. 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. Take risks, for example - InDex Pharmaceuticals Holding has 5 warning signs (and 1 which shouldn't be ignored) we think you should know about.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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

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