Avidity Biosciences (NASDAQ:RNA) investors are sitting on a loss of 25% if they invested a year ago
It's easy to match the overall market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Unfortunately the Avidity Biosciences, Inc. (NASDAQ:RNA) share price slid 25% over twelve months. That's disappointing when you consider the market returned 7.0%. Avidity Biosciences hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. The share price has dropped 35% in three months.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for Avidity Biosciences
Avidity Biosciences isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good 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, Avidity Biosciences increased its revenue by 58%. That's a strong result which is better than most other loss making companies. The share price drop of 25% over twelve months would be considered disappointing by many, so you might argue the company is getting little credit for its impressive revenue growth. On the bright side, if this company is moving profits in the right direction, top-line growth like that could be an opportunity. Our monkey brains haven't evolved to think exponentially, so humans do tend to underestimate companies that have exponential growth.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
Given that the market gained 7.0% in the last year, Avidity Biosciences shareholders might be miffed that they lost 25%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Notably, the loss over the last year isn't as bad as the 35% drop in the last three months. This probably signals that the business has recently disappointed shareholders - it will take time to win them back. 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. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Avidity Biosciences (of which 1 doesn't sit too well with us!) you should know about.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
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.
