As every investor would know, you don't hit a homerun every time you swing. But it would be foolish to simply accept every extremely large loss as an inevitable part of the game. So spare a thought for the long term shareholders of Amyris, Inc. (NASDAQ:AMRS); the share price is down a whopping 87% in the last twelve months. That'd be a striking reminder about the importance of diversification. Notably, shareholders had a tough run over the longer term, too, with a drop of 34% in the last three years. Furthermore, it's down 49% in about a quarter. That's not much fun for holders. 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.
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.
Amyris 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Amyris' revenue didn't grow at all in the last year. In fact, it fell 31%. That's not what investors generally want to see. The share price fall of 87% in a year tells the story. Holders should not lose the lesson: loss making companies should grow revenue. But markets do over-react, so there opportunity for investors who are willing to take the time to dig deeper and understand the business.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
This free interactive report on Amyris' balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
While the broader market lost about 12% in the twelve months, Amyris shareholders did even worse, losing 87%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 7% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Amyris better, we need to consider many other factors. Take risks, for example - Amyris has 5 warning signs (and 2 which make us uncomfortable) we think you should know about.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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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