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Is Avid Bioservices' (NASDAQ:CDMO) Share Price Gain Of 135% Well Earned?

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Simply Wall St
·3 min read
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Avid Bioservices, Inc. (NASDAQ:CDMO) shareholders have seen the share price descend 12% over the month. But that doesn't change the fact that the returns over the last three years have been very strong. Indeed, the share price is up a very strong 135% in that time. It's not uncommon to see a share price retrace a bit, after a big gain. The fundamental business performance will ultimately dictate whether the top is in, or if this is a stellar buying opportunity.

View our latest analysis for Avid Bioservices

Given that Avid Bioservices 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Avid Bioservices actually saw its revenue drop by 0.7% per year over three years. So we wouldn't have expected the share price to gain 33% per year, but it has. It's a good reminder that expectations about the future, not the past history, always impact share prices.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
earnings-and-revenue-growth

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

It's nice to see that Avid Bioservices shareholders have received a total shareholder return of 39% over the last year. Notably the five-year annualised TSR loss of 0.1% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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 Avid Bioservices is showing 2 warning signs in our investment analysis , you should know about...

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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.