Yahoo Finance Swelling losses haven't held back gains for Agios Pharmaceuticals (NASDAQ:AGIO) shareholders since they're up 71% over 1 year
Passive investing in index funds can generate returns that roughly match the overall market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Agios Pharmaceuticals, Inc. (NASDAQ:AGIO) share price is up 71% in the last 1 year, clearly besting the market return of around 21% (not including dividends). So that should have shareholders smiling. Zooming out, the stock is actually down 27% in the last three years.
In light of the stock dropping 7.4% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive one-year return.
See our latest analysis for Agios Pharmaceuticals
Agios Pharmaceuticals wasn't profitable in the last twelve months, 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last year Agios Pharmaceuticals saw its revenue grow by 55%. That's a head and shoulders above most loss-making companies. While the share price gain of 71% over twelve months is pretty tasty, you might argue it doesn't fully reflect the strong revenue growth. If that's the case, now might be the time to take a close look at Agios Pharmaceuticals. Human beings have trouble conceptualizing (and valuing) exponential growth. Is that what we're seeing here?
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free report showing analyst forecasts should help you form a view on Agios Pharmaceuticals
A Different Perspective
It's good to see that Agios Pharmaceuticals has rewarded shareholders with a total shareholder return of 71% in the last twelve months. Notably the five-year annualised TSR loss of 2% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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 risks, for instance. Every company has them, and we've spotted 3 warning signs for Agios Pharmaceuticals you should know about.
But note: Agios Pharmaceuticals 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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
