It’s easy to match the overall market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Investors in Arcturus Therapeutics Ltd. (NASDAQ:ARCT) have tasted that bitter downside in the last year, as the share price dropped 18%. That falls noticeably short of the market return of around 0.9%. Arcturus Therapeutics hasn’t been listed for long, so although we’re wary of recent listings that perform poorly, it may still prove itself with time. And the share price decline continued over the last week, dropping some 17%.
Arcturus 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. 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.
In just one year Arcturus Therapeutics saw its revenue fall by 31%. That’s not what investors generally want to see. Shareholders have seen the share price drop 18% in that time. That seems pretty reasonable given the lack of both profits and revenue growth. It’s hard to escape the conclusion that buyers must envision either growth down the track, cost cutting, or both.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. You can see what analysts are predicting for Arcturus Therapeutics in this interactive graph of future profit estimates.
A Different Perspective
While Arcturus Therapeutics shareholders are down 18% for the year, the market itself is up 0.9%. While the aim is to do better than that, it’s worth recalling that even great long-term investments sometimes underperform for a year or more. With the stock down 16% over the last three months, the market doesn’t seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we’d remain pretty wary until we see some strong business performance. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares – and the price they paid.
Arcturus Therapeutics is not the only stock insiders are buying. So take a peek at this free list of growing companies with 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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