CytomX Therapeutics, Inc. (NASDAQ:CTMX) shareholders should be happy to see the share price up 16% in the last month. But only the myopic could ignore the astounding decline over three years. To wit, the share price sky-dived 72% in that time. Arguably, the recent bounce is to be expected after such a bad drop. The thing to think about is whether the business has really turned around.
Because CytomX Therapeutics made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong 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, CytomX Therapeutics grew revenue at 6.7% per year. That's not a very high growth rate considering it doesn't make profits. But the share price crash at 20% per year does seem a bit harsh! We generally don't try to 'catch the falling knife'. Of course, revenue growth is nice but generally speaking the lower the profits, the riskier the business - and this business isn't making steady profits.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Take a more thorough look at CytomX Therapeutics' financial health with this free report on its balance sheet.
A Different Perspective
Investors in CytomX Therapeutics had a tough year, with a total loss of 1.8%, against a market gain of about 26%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 8% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. 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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for CytomX Therapeutics (of which 1 is a bit unpleasant!) you should know about.
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 US exchanges.
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