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While it may not be enough for some shareholders, we think it is good to see the Nektar Therapeutics (NASDAQ:NKTR) share price up 19% in a single quarter. But that doesn't change the fact that the returns over the last half decade have been stomach churning. Like a ship taking on water, the share price has sunk 75% in that time. It's true that the recent bounce could signal the company is turning over a new leaf, but we are not so sure. The million dollar question is whether the company can justify a long term recovery.
Since Nektar Therapeutics has shed US$101m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
Check out our latest analysis for Nektar Therapeutics
Nektar Therapeutics wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last five years Nektar Therapeutics saw its revenue shrink by 36% per year. That's definitely a weaker result than most pre-profit companies report. So it's not altogether surprising to see the share price down 12% per year in the same time period. We don't think this is a particularly promising picture. Ironically, that behavior could create an opportunity for the contrarian investor - but only if there are good reasons to predict a brighter future.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Nektar Therapeutics is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Nektar Therapeutics stock, you should check out this free report showing analyst consensus estimates for future profits.
A Different Perspective
We regret to report that Nektar Therapeutics shareholders are down 66% for the year. Unfortunately, that's worse than the broader market decline of 9.3%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 12% 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. For example, we've discovered 2 warning signs for Nektar Therapeutics that you should be aware of before investing here.