Adamas Pharmaceuticals, Inc. (NASDAQ:ADMS) shareholders will doubtless be very grateful to see the share price up 37% in the last quarter. But that is meagre solace when you consider how the price has plummeted over the last year. Specifically, the stock price nose-dived 71% in that time. Arguably, the recent bounce is to be expected after such a bad drop. The bigger issue is whether the company can sustain the momentum in the long term.
Check out our latest analysis for Adamas Pharmaceuticals
Given that Adamas Pharmaceuticals 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. 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.
Adamas Pharmaceuticals grew its revenue by 352% over the last year. That's well above most other pre-profit companies. So the hefty 71% share price crash makes us think the company has somehow offended market participants. There's clearly something unusual going on here such as an acquisition that hasn't delivered expected profits. We'd recommend taking a very close look at the stock (and any available forecasts), before considering a purchase, because the share price is not correlated with the revenue growth, that's for sure. Of course, investors do over-react when they are stressed out, so the sell-off could be unjustifiably severe.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Adamas 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 Adamas 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 4.1% in the last year, Adamas Pharmaceuticals shareholders lost 71%. 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 19% per year over five years. We realise that Buffett 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 businesses. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.