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Enanta Pharmaceuticals, Inc. (NASDAQ:ENTA) shareholders should be happy to see the share price up 16% in the last month. But that doesn't change the fact that the returns over the last three years have been stomach churning. Indeed, the share price is down a whopping 86% in the last three years. So it's about time shareholders saw some gains. Of course the real question is whether the business can sustain a turnaround. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
See our latest analysis for Enanta Pharmaceuticals
Given that Enanta 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. When a company doesn't make profits, we'd generally hope to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last three years Enanta Pharmaceuticals saw its revenue shrink by 11% per year. That is not a good result. Having said that the 23% annualized share price decline highlights the risk of investing in unprofitable companies. This business clearly needs to grow revenues if it is to perform as investors hope. There's no more than a snowball's chance in hell that share price will head back to its old highs, in the short term.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
Enanta Pharmaceuticals' TSR for the year was broadly in line with the market average, at 40%. To take a positive view, the gain is pleasing, and it sure beats annualized TSR loss of 13%, which was endured over half a decade. While 'turnarounds seldom turn' there are green shoots for Enanta Pharmaceuticals. It's always interesting to track share price performance over the longer term. But to understand Enanta Pharmaceuticals better, we need to consider many other factors. Even so, be aware that Enanta Pharmaceuticals is showing 2 warning signs in our investment analysis , and 1 of those is potentially serious...