Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Investors in Aadi Bioscience, Inc. (NASDAQ:AADI) have tasted that bitter downside in the last year, as the share price dropped 34%. That's well below the market decline of 9.4%. We wouldn't rush to judgement on Aadi Bioscience because we don't have a long term history to look at.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for Aadi Bioscience
Aadi Bioscience wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In just one year Aadi Bioscience saw its revenue fall by 23%. That looks pretty grim, at a glance. Shareholders have seen the share price drop 34% in that time. What would you expect when revenue is falling, and it doesn't make a profit? It's hard to escape the conclusion that buyers must envision either growth down the track, cost cutting, or both.
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 Aadi Bioscience stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
We doubt Aadi Bioscience shareholders are happy with the loss of 34% over twelve months. That falls short of the market, which lost 9.4%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. The share price decline has continued throughout the most recent three months, down 6.3%, suggesting an absence of enthusiasm from investors. 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Aadi Bioscience you should know about.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.
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