If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can significantly boost your returns by picking above-average stocks. For example, the Phathom Pharmaceuticals, Inc. (NASDAQ:PHAT) share price is up 96% in the last 1 year, clearly besting the market return of around 30% (not including dividends). That's a solid performance by our standards! In contrast, the longer term returns are negative, since the share price is 23% lower than it was three years ago.

Since the stock has added US$75m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Phathom Pharmaceuticals

Given that Phathom Pharmaceuticals didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

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

If you are thinking of buying or selling Phathom Pharmaceuticals stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

It's good to see that Phathom Pharmaceuticals has rewarded shareholders with a total shareholder return of 96% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 6% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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 Phathom Pharmaceuticals (1 is significant) that you should be aware of.

But note: Phathom Pharmaceuticals may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.