It's nice to see the PTC Therapeutics, Inc. (NASDAQ:PTCT) share price up 10% in a week. But that doesn't change the fact that the returns over the last three years have been disappointing. Regrettably, the share price slid 68% in that period. So it's good to see it climbing back up. While many would remain nervous, there could be further gains if the business can put its best foot forward.
Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.
See our latest analysis for PTC Therapeutics
Because PTC Therapeutics made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last three years, PTC Therapeutics saw its revenue grow by 28% per year, compound. That is faster than most pre-profit companies. The share price has moved in quite the opposite direction, down 19% over that time, a bad result. It seems likely that the market is worried about the continual losses. But a share price drop of that magnitude could well signal that the market is overly negative on the stock.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
PTC Therapeutics is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.
A Different Perspective
Investors in PTC Therapeutics had a tough year, with a total loss of 49%, against a market gain of about 15%. 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 7% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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 PTC Therapeutics is showing 5 warning signs in our investment analysis , and 1 of those is potentially serious...
Of course PTC Therapeutics may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.