We think intelligent long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. To wit, the Phathom Pharmaceuticals, Inc. (NASDAQ:PHAT) share price managed to fall 66% over five long years. We certainly feel for shareholders who bought near the top. Furthermore, it's down 57% in about a quarter. That's not much fun for holders.

With the stock having lost 12% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Phathom Pharmaceuticals 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. 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 half decade, Phathom Pharmaceuticals saw its revenue increase by 104% per year. That's better than most loss-making companies. Unfortunately for shareholders the share price has dropped 11% per year - disappointing considering the growth. It's safe to say investor expectations are more grounded now. If you think the company can keep up its revenue growth, you'd have to consider the possibility that there's an opportunity here.

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

This free interactive report on Phathom Pharmaceuticals' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market gained around 29% in the last year, Phathom Pharmaceuticals shareholders lost 9.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 11% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. 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. For instance, we've identified 3 warning signs for Phathom Pharmaceuticals (1 can't be ignored) that you should be aware of.

We will like Phathom Pharmaceuticals better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.