Investors might be losing patience for Zai Lab's (NASDAQ:ZLAB) increasing losses, as stock sheds 21% over the past week

Zai Lab Limited (NASDAQ:ZLAB) shareholders might understandably be very concerned that the share price has dropped 50% in the last quarter. But over the last three years the stock has shone bright like a diamond. The longer term view reveals that the share price is up 307% in that period. As long term investors the recent fall doesn't detract all that much from the longer term story. Only time will tell if there is still too much optimism currently reflected in the share price.

Since the long term performance has been good but there's been a recent pullback of 21%, let's check if the fundamentals match the share price.

See our latest analysis for Zai Lab

Zai Lab isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Zai Lab's revenue trended up 106% each year over three years. That's well above most pre-profit companies. And it's not just the revenue that is taking off. The share price is up 60% per year in that time. Despite the strong run, top performers like Zai Lab have been known to go on winning for decades. So we'd recommend you take a closer look at this one, or even put it on your watchlist.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Zai Lab is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So it makes a lot of sense to check out what analysts think Zai Lab will earn in the future (free analyst consensus estimates)

A Different Perspective

The last twelve months weren't great for Zai Lab shares, which cost holders 32%, while the market was up about 26%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Fortunately the longer term story is brighter, with total returns averaging about 60% per year over three years. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. 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. Even so, be aware that Zai Lab is showing 2 warning signs in our investment analysis , you should know about...

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.

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.

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