It is doubtless a positive to see that the Gritstone bio, Inc. (NASDAQ:GRTS) share price has gained some 32% in the last three months. But that is small recompense for the exasperating returns over three years. Tragically, the share price declined 66% in that time. Some might say the recent bounce is to be expected after such a bad drop. Perhaps the company has turned over a new leaf.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
Gritstone bio isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last three years, Gritstone bio saw its revenue grow by 51% per year, compound. That is faster than most pre-profit companies. In contrast, the share price is down 19% 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.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
The last twelve months weren't great for Gritstone bio shares, which performed worse than the market, costing holders 37%. The market shed around 7.9%, no doubt weighing on the stock price. The three-year loss of 19% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. 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. Even so, be aware that Gritstone bio is showing 4 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.
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