Yahoo Finance Zai Lab (NASDAQ:ZLAB) dips 29% this week as increasing losses might not be inspiring confidence among its investors
As every investor would know, you don't hit a homerun every time you swing. But it should be a priority to avoid stomach churning catastrophes, wherever possible. So spare a thought for the long term shareholders of Zai Lab Limited (NASDAQ:ZLAB); the share price is down a whopping 82% in the last twelve months. That'd be a striking reminder about the importance of diversification. On the other hand, the stock is actually up 1.5% over three years. Furthermore, it's down 42% in about a quarter. That's not much fun for holders. 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.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
View our latest analysis for Zai Lab
Zai Lab isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Zai Lab grew its revenue by 195% over the last year. That's well above most other pre-profit companies. So the hefty 82% share price crash makes us think the company has somehow offended market participants. Something weird is definitely impacting the stock price; we'd venture the company has destroyed value somehow. We'd recommend taking a very close look at the stock (and any available forecasts), before considering a purchase, because the share price is not correlated with the revenue growth, that's for sure. Of course, investors do over-react when they are stressed out, so the sell-off could be unjustifiably severe.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Zai Lab is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So it makes a lot of sense to check out what analysts think Zai Lab will earn in the future (free analyst consensus estimates)
A Different Perspective
The last twelve months weren't great for Zai Lab shares, which performed worse than the market, costing holders 82%. The market shed around 8.4%, no doubt weighing on the stock price. Fortunately the longer term story is brighter, with total returns averaging about 0.5% per year over three years. Sometimes when a good quality long term winner has a weak period, it's turns out to be an opportunity, but you really need to be sure that the quality is there. It's always interesting to track share price performance over the longer term. But to understand Zai Lab better, we need to consider many other factors. For example, we've discovered 3 warning signs for Zai Lab that you should be aware of before investing here.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.
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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.
