Sutro Biopharma (NASDAQ:STRO shareholders incur further losses as stock declines 11% this week, taking three-year losses to 78%

Sutro Biopharma, Inc. (NASDAQ:STRO) shareholders should be happy to see the share price up 17% in the last month. But that doesn't change the fact that the returns over the last three years have been stomach churning. To wit, the share price sky-dived 78% in that time. So we're relieved for long term holders to see a bit of uplift. Of course the real question is whether the business can sustain a turnaround.

If the past week is anything to go by, investor sentiment for Sutro Biopharma isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for Sutro Biopharma

Given that Sutro Biopharma didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over three years, Sutro Biopharma grew revenue at 31% per year. That's well above most other pre-profit companies. So on the face of it we're really surprised to see the share price down 21% a year in the same time period. You'd want to take a close look at the balance sheet, as well as the losses. 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 how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Sutro Biopharma is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Sutro Biopharma in this interactive graph of future profit estimates.

A Different Perspective

Sutro Biopharma shareholders are down 15% for the year, but the market itself is up 21%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 11% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. 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 for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Sutro Biopharma , and understanding them should be part of your investment process.

But note: Sutro Biopharma may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com