PTC Therapeutics, Inc. (NASDAQ:PTCT) shareholders have seen the share price descend 11% over the month. But that does not change the realty that the stock's performance has been terrific, over five years. To be precise, the stock price is 334% higher than it was five years ago, a wonderful performance by any measure. So we don't think the recent decline in the share price means its story is a sad one. But the real question is whether the business fundamentals can improve over the long term. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 34% drop, in the last year.
After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.
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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last 5 years Therapeutics saw its revenue grow at 28% per year. That's well above most pre-profit companies. Arguably, this is well and truly reflected in the strong share price gain of 34%(per year) over the same period. It's never too late to start following a top notch stock like Therapeutics, since some long term winners go on winning for decades. So we'd recommend you take a closer look at this one, but keep in mind the market seems optimistic.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Therapeutics is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling Therapeutics stock, you should check out this free report showing analyst consensus estimates for future profits.
A Different Perspective
Therapeutics shareholders are down 34% for the year, but the market itself is up 4.7%. 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 34%, 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 2 warning signs for Therapeutics you should know about.
Of course Therapeutics may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.