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The art and science of stock market investing requires a tolerance for losing money on some of the shares you buy. But it should be a priority to avoid stomach churning catastrophes, wherever possible. It must have been painful to be a Pacific Biosciences of California, Inc. (NASDAQ:PACB) shareholder over the last year, since the stock price plummeted 81% in that time. That'd be enough to make even the strongest stomachs churn. However, the longer term returns haven't been so bad, with the stock down 26% in the last three years. The falls have accelerated recently, with the share price down 51% in the last three months. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
After losing 18% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
Given that Pacific Biosciences of California 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 expect strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last twelve months, Pacific Biosciences of California increased its revenue by 46%. That's definitely a respectable growth rate. Unfortunately, the market wanted something better, given it sent the share price 81% lower during the year. It could be that the losses are too much for investors to handle without losing their nerve. It seems that the market has concerns about the future, because that share price action does not seem to reflect the revenue growth at all.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
We regret to report that Pacific Biosciences of California shareholders are down 81% for the year. Unfortunately, that's worse than the broader market decline of 11%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 9% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. For instance, we've identified 3 warning signs for Pacific Biosciences of California that you should be aware of.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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.