The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Investors in Forma Therapeutics Holdings, Inc. (NASDAQ:FMTX) have tasted that bitter downside in the last year, as the share price dropped 41%. That's well below the market return of 39%. We wouldn't rush to judgement on Forma Therapeutics Holdings because we don't have a long term history to look at. The falls have accelerated recently, with the share price down 19% in the last three months.
Given that Forma Therapeutics Holdings 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 it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Forma Therapeutics Holdings' revenue didn't grow at all in the last year. In fact, it fell 94%. If you think that's a particularly bad result, you're statistically on the money No surprise, then, that the share price fell 41% over the year. It's always work digging deeper, but we'd probably need to see a strong balance sheet and bottom line improvements to get interested in this one.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
If you are thinking of buying or selling Forma Therapeutics Holdings stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
While Forma Therapeutics Holdings shareholders are down 41% for the year, the market itself is up 39%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. With the stock down 19% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. 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. To that end, you should be aware of the 3 warning signs we've spotted with Forma Therapeutics Holdings .
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
This article by Simply Wall St is general in nature. 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.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
In This StoryFMTX
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