Taking the occasional loss comes part and parcel with investing on the stock market. And unfortunately for Next Science Limited (ASX:NXS) shareholders, the stock is a lot lower today than it was a year ago. The share price is down a hefty 57% in that time. Because Next Science hasn't been listed for many years, the market is still learning about how the business performs. Shareholders have had an even rougher run lately, with the share price down 15% in the last 90 days.
Given that Next Science 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Next Science's revenue didn't grow at all in the last year. In fact, it fell 38%. That looks pretty grim, at a glance. In the absence of profits, it's not unreasonable that the share price fell 57%. Having said that, if growth is coming in the future, the stock may have better days ahead. We don't generally like to own companies with falling revenues and no profits, so we're pretty cautious of this one, at the moment.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. If you are thinking of buying or selling Next Science stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
Next Science shareholders are down 57% for the year, even worse than the market loss of 3.5%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. The share price decline has continued throughout the most recent three months, down 15%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Next Science , and understanding them should be part of your investment process.
Next Science is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
This article by Simply Wall St is general in nature. 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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