Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
The simplest way to benefit from a rising market is to buy an index fund. But if you buy individual stocks, you can do both better or worse than that. For example, the Scholar Rock Holding Corporation (NASDAQ:SRRK) share price is down 10% in the last year. That contrasts poorly with the market return of 6.4%. Scholar Rock Holding may have better days ahead, of course; we’ve only looked at a one year period. It’s down 27% in about a month.
Scholar Rock Holding isn’t a profitable company, so 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last year Scholar Rock Holding saw its revenue grow by 64%. That’s well above most other pre-profit companies. Given the revenue growth, the share price drop of 10% seems quite harsh. Our sympathies to shareholders who are now underwater. On the bright side, if this company is moving profits in the right direction, top-line growth like that could be an opportunity. Our monkey brains haven’t evolved to think exponentially, so humans do tend to underestimate companies that have exponential growth.
This free interactive report on Scholar Rock Holding’s balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
While Scholar Rock Holding shareholders are down 10% for the year, the market itself is up 6.4%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Notably, the loss over the last year isn’t as bad as the 21% drop in the last three months. So it seems like some holders have been dumping the stock of late – and that’s not bullish. You could get a better understanding of Scholar Rock Holding’s growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
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 US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.