While it may not be enough for some shareholders, we think it is good to see the Aurinia Pharmaceuticals Inc. (NASDAQ:AUPH) share price up 27% in a single quarter. But that doesn't change the fact that the returns over the last three years have been stomach churning. In that time the share price has melted like a snowball in the desert, down 77%. Arguably, the recent bounce is to be expected after such a bad drop. Only time will tell if the company can sustain the turnaround.
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.
Given that Aurinia 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. 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.
In the last three years, Aurinia Pharmaceuticals saw its revenue grow by 43% per year, compound. That is faster than most pre-profit companies. So why has the share priced crashed 21% per year, in the same time? 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 company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Take a more thorough look at Aurinia Pharmaceuticals' financial health with this free report on its balance sheet.
A Different Perspective
Aurinia Pharmaceuticals shareholders are up 2.0% for the year. But that was short of the market average. If we look back over five years, the returns are even better, coming in at 7% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. Before spending more time on Aurinia Pharmaceuticals it might be wise to click here to see if insiders have been buying or selling shares.
But note: Aurinia Pharmaceuticals may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
