It's not possible to invest over long periods without making some bad investments. But really big losses can really drag down an overall portfolio. So consider, for a moment, the misfortune of Genscript Biotech Corporation (HKG:1548) investors who have held the stock for three years as it declined a whopping 75%. That would be a disturbing experience. And more recent buyers are having a tough time too, with a drop of 53% in the last year. Furthermore, it's down 43% in about a quarter. That's not much fun for holders.
With the stock having lost 7.5% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
Genscript Biotech 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last three years, Genscript Biotech saw its revenue grow by 24% per year, compound. That's well above most other pre-profit companies. So why has the share priced crashed 21% per year, in the same time? The share price makes us wonder if there is an issue with profitability. Sometimes fast revenue growth doesn't lead to profits. If the company is low on cash, it may have to raise capital soon.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Genscript Biotech is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling Genscript Biotech stock, you should check out this free report showing analyst consensus estimates for future profits.
A Different Perspective
Investors in Genscript Biotech had a tough year, with a total loss of 53%, against a market gain of about 7.3%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 9% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. If you would like to research Genscript Biotech in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com