Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. For example, the Albireo Pharma, Inc. (NASDAQ:ALBO) share price is down 17% in the last year. That falls noticeably short of the market return of around 12%. At least the damage isn't so bad if you look at the last three years, since the stock is down 8.5% in that time. On top of that, the share price is down 8.9% in the last week. But this could be related to the soft market, which is down about 7.6% in the same period.
Given that Albireo Pharma 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 expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Albireo Pharma's revenue didn't grow at all in the last year. In fact, it fell 69%. That looks like a train-wreck result to investors far and wide. No surprise, then, that the share price fell 17% over the year. It's always work digging deeper, but we'd probably need to see a strong balance sheet and bottom line improvements to get interested in this one.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
If you are thinking of buying or selling Albireo Pharma stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Over the last year, Albireo Pharma shareholders took a loss of 17%. In contrast the market gained about 12%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. The three-year loss of 2.9% 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 Warren Buffett famously said he likes to 'buy when there is blood on the streets', he also focusses on high quality stocks with solid prospects. It's always interesting to track share price performance over the longer term. But to understand Albireo Pharma better, we need to consider many other factors. For example, we've discovered 3 warning signs for Albireo Pharma that you should be aware of before investing here.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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