Long term investing works well, but it doesn’t always work for each individual stock. It hits us in the gut when we see fellow investors suffer a loss. Imagine if you held Intercept Pharmaceuticals, Inc. (NASDAQ:ICPT) for half a decade as the share price tanked 84%. And some of the more recent buyers are probably worried, too, with the stock falling 66% in the last year. Furthermore, it’s down 47% in about a quarter. That’s not much fun for holders.
While a drop like that is definitely a body blow, money isn’t as important as health and happiness.
Intercept 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over five years, Intercept Pharmaceuticals grew its revenue at 53% per year. That’s better than most loss-making companies. So it’s not at all clear to us why the share price sunk 13% throughout that time. It could be that the stock was over-hyped before. We’d recommend carefully checking for indications of future growth – and balance sheet threats – before considering a purchase.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Intercept Pharmaceuticals is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Intercept Pharmaceuticals stock, you should check out this free report showing analyst consensus estimates for future profits.
A Different Perspective
While the broader market gained around 20% in the last year, Intercept Pharmaceuticals shareholders lost 66%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 13% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. For example, we’ve discovered 3 warning signs for Intercept Pharmaceuticals that you should be aware of before investing here.
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. 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.