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Did You Manage To Avoid Seres Therapeutics's (NASDAQ:MCRB) Painful 66% Share Price Drop?

Simply Wall St

It's nice to see the Seres Therapeutics, Inc. (NASDAQ:MCRB) share price up 21% in a week. But that doesn't change the fact that the returns over the last three years have been disappointing. Regrettably, the share price slid 66% in that period. So the improvement may be a real relief to some. The rise has some hopeful, but turnarounds are often precarious.

Check out our latest analysis for Seres Therapeutics

Seres Therapeutics 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over three years, Seres Therapeutics grew revenue at 18% per year. That's a pretty good rate of top-line growth. So some shareholders would be frustrated with the compound loss of 30% per year. To be frank we're surprised to see revenue growth and share price growth diverge so strongly. So this is one stock that might be worth investigating further, or even adding to your watchlist.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

NasdaqGS:MCRB Income Statement, January 17th 2020
NasdaqGS:MCRB Income Statement, January 17th 2020

Take a more thorough look at Seres Therapeutics's financial health with this free report on its balance sheet.

A Different Perspective

Seres Therapeutics shareholders are down 39% for the year, but the broader market is up 26%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Shareholders have lost 30% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. 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. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Seres Therapeutics you should know about.

But note: Seres Therapeutics may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.