Investors can buy low cost index fund if they want to receive the average market return. But across the board there are plenty of stocks that underperform the market. That's what has happened with the Incyte Corporation (NASDAQ:INCY) share price. It's up 37% over three years, but that is below the market return. Zooming in, the stock is actually down 12% in the last year.
Incyte wasn't profitable in the last twelve months, 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over the last three years Incyte has grown its revenue at 17% annually. That's a very respectable growth rate. The stock is up 11% per year over three years, which isn't bad, but is nothing to write home about. Arguably, that means, the market (previously) expected stronger growth from the company. However, if you can reasonably expect profits in the next few years, this stock might belong on your watchlist.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. So it makes a lot of sense to check out what analysts think Incyte will earn in the future (free profit forecasts).
A Different Perspective
While the broader market gained around 59% in the last year, Incyte shareholders lost 12%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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.
Incyte 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.
If you’re looking to trade Incyte, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.