Investors push Sarepta Therapeutics (NASDAQ:SRPT) 17% lower this week, company's increasing losses might be to blame

By
Simply Wall St
Published
January 17, 2022
NasdaqGS:SRPT
Source: Shutterstock

Sarepta Therapeutics, Inc. (NASDAQ:SRPT) shareholders have seen the share price descend 19% over the month. But that scarcely detracts from the really solid long term returns generated by the company over five years. It's fair to say most would be happy with 118% the gain in that time. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Ultimately business performance will determine whether the stock price continues the positive long term trend. Unfortunately not all shareholders will have held it for five years, so spare a thought for those caught in the 42% decline over the last three years: that's a long time to wait for profits.

While the stock has fallen 17% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

View our latest analysis for Sarepta Therapeutics

Because Sarepta Therapeutics made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

For the last half decade, Sarepta Therapeutics can boast revenue growth at a rate of 42% per year. Even measured against other revenue-focussed companies, that's a good result. Meanwhile, its share price performance certainly reflects the strong growth, given the share price grew at 17% per year, compound, during the period. This suggests the market has well and truly recognized the progress the business has made. To our minds that makes Sarepta Therapeutics worth investigating - it may have its best days ahead.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

earnings-and-revenue-growth
NasdaqGS:SRPT Earnings and Revenue Growth January 17th 2022

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. This free report showing analyst forecasts should help you form a view on Sarepta Therapeutics

A Different Perspective

Investors in Sarepta Therapeutics had a tough year, with a total loss of 21%, against a market gain of about 15%. 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 17%, 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. Take risks, for example - Sarepta Therapeutics has 2 warning signs we think you should be aware of.

Sarepta Therapeutics is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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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