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As every investor would know, not every swing hits the sweet spot. But really big losses can really drag down an overall portfolio. So consider, for a moment, the misfortune of Mersana Therapeutics, Inc. (NASDAQ:MRSN) investors who have held the stock for three years as it declined a whopping 83%. That would be a disturbing experience. Shareholders have had an even rougher run lately, with the share price down 42% in the last 90 days. While a drop like that is definitely a body blow, money isn't as important as health and happiness.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Check out our latest analysis for Mersana Therapeutics
Mersana Therapeutics 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.
Over three years, Mersana Therapeutics grew revenue at 94% per year. That is faster than most pre-profit companies. So why has the share priced crashed 22% per year, in the same time? The share price makes us wonder if there is an issue with profitability. Sometimes fast revenue growth doesn't lead to profits. If the company is low on cash, it may have to raise capital soon.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Mersana Therapeutics is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Mersana Therapeutics in this interactive graph of future profit estimates.
A Different Perspective
It's nice to see that Mersana Therapeutics shareholders have received a total shareholder return of 83% over the last year. There's no doubt those recent returns are much better than the TSR loss of 6% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 3 warning signs for Mersana Therapeutics you should be aware of.
Of course Mersana Therapeutics may not be the best stock to buy. So you may wish to see this free collection of growth stocks.