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Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. That downside risk was realized by Arcus Biosciences, Inc. (NYSE:RCUS) shareholders over the last year, as the share price declined 30%. That's well bellow the market return of 6.5%. Arcus Biosciences may have better days ahead, of course; we've only looked at a one year period. In the last ninety days we've seen the share price slide 34%.
Given that Arcus Biosciences 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Arcus Biosciences grew its revenue by 232% over the last year. That's a strong result which is better than most other loss making companies. Given the revenue growth, the share price drop of 30% seems quite harsh. Our sympathies to shareholders who are now underwater. Prima facie, revenue growth like that should be a good thing, so it's worth checking whether losses have stabilized. Our brains have evolved to think in linear fashion, so there's value in learning to recognize exponential growth. We are, in some ways, simply the wisest of the monkeys.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So it makes a lot of sense to check out what analysts think Arcus Biosciences will earn in the future (free profit forecasts).
A Different Perspective
Given that the market gained 6.5% in the last year, Arcus Biosciences shareholders might be miffed that they lost 30%. 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 34% drop in the last three months. This probably signals that the business has recently disappointed shareholders - it will take time to win them back. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Arcus Biosciences by clicking this link.
Arcus Biosciences is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.