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Investing in stocks comes with the risk that the share price will fall. And unfortunately for ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) shareholders, the stock is a lot lower today than it was a year ago. The share price is down a hefty 56% in that time. On the other hand, the stock is actually up 16% over three years. Unfortunately the share price momentum is still quite negative, with prices down 25% in thirty days. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
Check out our latest analysis for ACADIA Pharmaceuticals
ACADIA Pharmaceuticals isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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.
ACADIA Pharmaceuticals grew its revenue by 18% over the last year. We think that is pretty nice growth. Unfortunately it seems investors wanted more, because the share price is down 56% in that time. It is of course possible that the business will still deliver strong growth, it will just take longer than expected to do it. To our minds it isn't enough to just look at revenue, anyway. Always consider when profits will flow.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
ACADIA Pharmaceuticals is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for ACADIA Pharmaceuticals in this interactive graph of future profit estimates.
A Different Perspective
While the broader market gained around 33% in the last year, ACADIA Pharmaceuticals shareholders lost 56%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 8% per year over five years. 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. It's always interesting to track share price performance over the longer term. But to understand ACADIA Pharmaceuticals better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with ACADIA Pharmaceuticals , and understanding them should be part of your investment process.