Shareholders in Mersana Therapeutics (NASDAQ:MRSN) have lost 80%, as stock drops 15% this past week

Mersana Therapeutics, Inc. (NASDAQ:MRSN) shareholders should be happy to see the share price up 20% in the last quarter. But that is meagre solace in the face of the shocking decline over three years. Indeed, the share price is down a whopping 80% in the last three years. So it's about time shareholders saw some gains. Of course the real question is whether the business can sustain a turnaround.

With the stock having lost 15% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

View our latest analysis for Mersana Therapeutics

Mersana Therapeutics 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 desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over three years, Mersana Therapeutics grew revenue at 106% per year. That's well above most other pre-profit companies. So why has the share priced crashed 22% per year, in the same time? The share price makes us wonder if there is an issue with profitability. Ultimately, revenue growth doesn't amount to much if the business can't scale well. Unless the balance sheet is strong, the company might have to raise capital.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. If you are thinking of buying or selling Mersana Therapeutics stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

Mersana Therapeutics shareholders are down 24% for the year, but the market itself is up 22%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Mersana Therapeutics better, we need to consider many other factors. For instance, we've identified 3 warning signs for Mersana Therapeutics that you should be aware of.

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 American exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.