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When you buy shares in a company, there is always a risk that the price drops to zero. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! For example, the Allergy Therapeutics plc (LON:AGY) share price has soared 178% in the last 1 year. Most would be very happy with that, especially in just one year! It's also good to see the share price up 19% over the last quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report. Unfortunately the longer term returns are not so good, with the stock falling 86% in the last three years.
So let's assess the underlying fundamentals over the last 1 year and see if they've moved in lock-step with shareholder returns.
Check out our latest analysis for Allergy Therapeutics
Because Allergy Therapeutics made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Allergy Therapeutics actually shrunk its revenue over the last year, with a reduction of 7.4%. So we would not have expected the share price to rise 178%. This is a good example of how buyers can push up prices even before the fundamental metrics show much growth. It's quite likely the revenue fall was already priced in, anyway.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
If you are thinking of buying or selling Allergy Therapeutics stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
We're pleased to report that Allergy Therapeutics shareholders have received a total shareholder return of 178% over one year. Notably the five-year annualised TSR loss of 1.1% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Allergy Therapeutics (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.