Taking the occasional loss comes part and parcel with investing on the stock market. Anyone who held Sutro Biopharma, Inc. (NASDAQ:STRO) over the last year knows what a loser feels like. The share price has slid 62% in that time. At least the damage isn't so bad if you look at the last three years, since the stock is down 10% in that time. The falls have accelerated recently, with the share price down 50% in the last three months.
After losing 10% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
Because Sutro Biopharma 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 fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last twelve months, Sutro Biopharma increased its revenue by 30%. That's definitely a respectable growth rate. Unfortunately it seems investors wanted more, because the share price is down 62% in that time. It is of course possible that the business will still deliver strong growth, it will just take longer than expected to do it. To our minds it isn't enough to just look at revenue, anyway. Always consider when profits will flow.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
The last twelve months weren't great for Sutro Biopharma shares, which cost holders 62%, while the market was up about 4.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The three-year loss of 3% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. 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. To that end, you should be aware of the 2 warning signs we've spotted with Sutro Biopharma .
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.
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.