Even though Avacta Group (LON:AVCT) has lost UK£39m market cap in last 7 days, shareholders are still up 304% over 3 years
The Avacta Group Plc (LON:AVCT) share price has had a bad week, falling 12%. But over three years the performance has been really wonderful. In fact, the share price has taken off in that time, up 304%. So the recent fall doesn't do much to dampen our respect for the business. The share price action could signify that the business itself is dramatically improved, in that time.
While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.
View our latest analysis for Avacta Group
Avacta Group 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over the last three years Avacta Group has grown its revenue at 4.4% annually. Considering the company is losing money, we think that rate of revenue growth is uninspiring. Therefore, we're a little surprised to see the share price gain has been so strong, at 59% per year, compound, over three years. We'll tip our hats to that, any day, but the top-line growth isn't particularly impressive when you compare it to other pre-profit companies. Shareholders would want to be sure that the share price rise is sustainable.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
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. If you are thinking of buying or selling Avacta Group stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
Investors in Avacta Group had a tough year, with a total loss of 54%, against a market gain of about 3.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 7%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Avacta Group better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Avacta Group , and understanding them should be part of your investment process.
Of course Avacta Group may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB 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.
