While not a mind-blowing move, it is good to see that the Zai Lab Limited (NASDAQ:ZLAB) share price has gained 24% in the last three months. But that doesn’t change the fact that the returns over the last three years have been disappointing. Tragically, the share price declined 59% in that time. So it is really good to see an improvement. Perhaps the company has turned over a new leaf.

With that in mind, it’s worth seeing if the company’s underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

View our latest analysis for Zai Lab

Because Zai Lab made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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 would hope for good top-line growth to make up for the lack of earnings.

Over three years, Zai Lab grew revenue at 31% per year. That is faster than most pre-profit companies. In contrast, the share price is down 17% compound, over three years – disappointing by most standards. This could mean hype has come out of the stock because the losses are concerning investors. When we see revenue growth, paired with a falling share price, we can’t help wonder if there is an opportunity for those who are willing to dig deeper.

The graphic below depicts how earnings and revenue have changed over time (unveil 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 we recommend checking out this free report showing consensus forecasts

Zai Lab shareholders are up 5.6% for the year. But that was short of the market average. But at least that’s still a gain! Over five years the TSR has been a reduction of 6% per year, over five years. It could well be that the business is stabilizing. 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 instance, we’ve identified 1 warning sign for Zai Lab that you should be aware of.

We will like Zai Lab 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.