While it may not be enough for some shareholders, we think it is good to see the Sutro Biopharma, Inc. (NASDAQ:STRO) share price up 28% in a single quarter. But that's not enough to compensate for the decline over the last twelve months. Like a receding glacier in a warming world, the share price has melted 54% in that period. So the bounce should be viewed in that context. Arguably, the fall was overdone.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last twelve months, Sutro Biopharma increased its revenue by 17%. We think that is pretty nice growth. Meanwhile, the share price tanked 54%, suggesting the market had much higher expectations. It is of course possible that the business will still deliver strong growth, it will just take longer than expected to do it. For us it's important to consider when you think a company will become profitable, if you're basing your valuation on revenue.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
If you are thinking of buying or selling Sutro Biopharma stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
The last twelve months weren't great for Sutro Biopharma shares, which performed worse than the market, costing holders 54%. Meanwhile, the broader market slid about 19%, likely weighing on the stock. The three-year loss of 10% 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. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Sutro Biopharma is showing 3 warning signs in our investment analysis , and 1 of those is potentially serious...
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.
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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.
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