Would Shareholders Who Purchased Agios Pharmaceuticals' (NASDAQ:AGIO) Stock Three Years Be Happy With The Share price Today?

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Agios Pharmaceuticals, Inc. (NASDAQ:AGIO) shareholders have had that experience, with the share price dropping 39% in three years, versus a market return of about 63%. More recently, the share price has dropped a further 15% in a month.

Check out our latest analysis for Agios Pharmaceuticals

Agios Pharmaceuticals isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last three years, Agios Pharmaceuticals saw its revenue grow by 35% per year, compound. That's well above most other pre-profit companies. The share price drop of 12% per year over three years would be considered disappointing by many, so you might argue the company is getting little credit for its impressive revenue growth. It's possible that the prior share price assumed unrealistically high future growth. Before considering a purchase, investors should consider how quickly expenses are growing, relative to revenue.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth

Agios Pharmaceuticals is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think Agios Pharmaceuticals will earn in the future (free analyst consensus estimates)

A Different Perspective

Agios Pharmaceuticals shareholders are up 6.1% for the year. But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 2% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 3 warning signs for Agios Pharmaceuticals (1 is significant) that you should be aware of.

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.

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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