Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Unfortunately the Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) share price slid 42% over twelve months. That's well below the market return of 35%. At least the damage isn't so bad if you look at the last three years, since the stock is down 22% in that time. Furthermore, it's down 14% in about a quarter. That's not much fun for holders.
Given that Ionis Pharmaceuticals didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In just one year Ionis Pharmaceuticals saw its revenue fall by 26%. That's not what investors generally want to see. Shareholders have seen the share price drop 42% in that time. That seems pretty reasonable given the lack of both profits and revenue growth. We think most holders must believe revenue growth will improve, or else costs will decline.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Ionis Pharmaceuticals is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.
A Different Perspective
Ionis Pharmaceuticals shareholders are down 42% for the year, but the market itself is up 35%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 5%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Ionis Pharmaceuticals you should know about.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
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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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.
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