Akebia Therapeutics, Inc. (NASDAQ:AKBA) shareholders should be happy to see the share price up 29% in the last month. But that isn’t much consolation to those who have suffered through the declines of the last year. Like an arid lake in a warming world, shareholder value has evaporated, with the share price down 50% in that time. It’s not that amazing to see a bounce after a drop like that. Of course, it could be that the fall was overdone.
Akebia Therapeutics isn’t a profitable company, so 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 yet make profits, we’d generally expect to see good revenue growth. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last year Akebia Therapeutics saw its revenue grow by 155%. That’s well above most other pre-profit companies. In contrast the share price is down 50% over twelve months. Yes, the market can be a fickle mistress. This could mean hype has come out of the stock because the bottom line is concerning investors. Generally speaking investors would consider a stock like this less risky once it turns a profit. But when do you think that will happen?
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
This free interactive report on Akebia Therapeutics’s balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
The last twelve months weren’t great for Akebia Therapeutics shares, which cost holders 50%, while the market was up about 4.6%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. The three-year loss of 2.2% per year isn’t as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Warren Buffett famously said he likes to ‘buy when there is blood on the streets’, he also focusses on high quality stocks with solid prospects. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
We will like Akebia Therapeutics better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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