Fulcrum Therapeutics, Inc. (NASDAQ:FULC) shareholders should be happy to see the share price up 17% in the last month. But that is minimal compensation for the share price under-performance over the last year. The cold reality is that the stock has dropped 39% in one year, under-performing the market.
Fulcrum Therapeutics isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Fulcrum Therapeutics grew its revenue by 1,615% over the last year. That's well above most other pre-profit companies. Given the revenue growth, the share price drop of 39% seems quite harsh. Our sympathies to shareholders who are now underwater. Prima facie, revenue growth like that should be a good thing, so it's worth checking whether losses have stabilized. Our brains have evolved to think in linear fashion, so there's value in learning to recognize exponential growth. We are, in some ways, simply the wisest of the monkeys.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So it makes a lot of sense to check out what analysts think Fulcrum Therapeutics will earn in the future (free profit forecasts).
A Different Perspective
Given that the market gained 44% in the last year, Fulcrum Therapeutics shareholders might be miffed that they lost 39%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 13% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. 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. Case in point: We've spotted 3 warning signs for Fulcrum Therapeutics you should be aware of, and 1 of them is a bit concerning.
Fulcrum 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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