Arrowhead Pharmaceuticals, Inc. (NASDAQ:ARWR) shareholders should be happy to see the share price up 11% in the last month. But over the last three years we've seen a quite serious decline. Tragically, the share price declined 66% in that time. Some might say the recent bounce is to be expected after such a bad drop. While many would remain nervous, there could be further gains if the business can put its best foot forward.

With the stock having lost 9.3% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for Arrowhead Pharmaceuticals

Arrowhead 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. Shareholders of unprofitable companies usually desire strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

Over the last three years, Arrowhead Pharmaceuticals' revenue dropped 32% per year. That's definitely a weaker result than most pre-profit companies report. Arguably, the market has responded appropriately to this business performance by sending the share price down 18% (annualized) in the same time period. Bagholders or 'baggies' are people who buy more of a stock as the price collapses. They are then left 'holding the bag' if the shares turn out to be worthless. It could be a while before the company repays long suffering shareholders with share price gains.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free report showing analyst forecasts should help you form a view on Arrowhead Pharmaceuticals

A Different Perspective

Arrowhead Pharmaceuticals shareholders are down 1.4% for the year, but the market itself is up 34%. 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 10% 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. Case in point: We've spotted 4 warning signs for Arrowhead Pharmaceuticals you should be aware of.

Arrowhead Pharmaceuticals is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been 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.