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Idorsia Ltd (VTX:IDIA) shareholders will doubtless be very grateful to see the share price up 105% in the last week. But that is meagre solace in the face of the shocking decline over three years. To wit, the share price sky-dived 89% in that time. So we're relieved for long term holders to see a bit of uplift. But the more important question is whether the underlying business can justify a higher price still. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
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.
Check out our latest analysis for Idorsia
Given that Idorsia 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. 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.
Over three years, Idorsia grew revenue at 40% per year. That is faster than most pre-profit companies. So on the face of it we're really surprised to see the share price down 24% a year in the same time period. The share price makes us wonder if there is an issue with profitability. Ultimately, revenue growth doesn't amount to much if the business can't scale well. If the company is low on cash, it may have to raise capital soon.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
If you are thinking of buying or selling Idorsia stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Idorsia shareholders are down 78% for the year, but the market itself is up 3.6%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 13% over the last half decade. 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 Idorsia better, we need to consider many other factors. For instance, we've identified 4 warning signs for Idorsia (3 are a bit unpleasant) that you should be aware of.