It's not a secret that every investor will make bad investments, from time to time. But serious investors should think long and hard about avoiding extreme losses. We wouldn't blame Senseonics Holdings, Inc. (NYSEMKT:SENS) shareholders if they were still in shock after the stock dropped like a lead balloon, down 76% in just one year. A loss like this is a stark reminder that portfolio diversification is important. Notably, shareholders had a tough run over the longer term, too, with a drop of 73% in the last three years. The falls have accelerated recently, with the share price down 44% in the last three months.
Because Senseonics Holdings is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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.
Senseonics Holdings grew its revenue by 76% over the last year. That's a strong result which is better than most other loss making companies. So the hefty 76% share price crash makes us think the company has somehow offended market participants. There's clearly something unusual going on here such as an acquisition that hasn't delivered expected profits. We'd recommend taking a very close look at the stock (and any available forecasts), before considering a purchase, because the share price is not correlated with the revenue growth, that's for sure. Of course, investors do over-react when they are stressed out, so the sell-off could be unjustifiably severe.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
The last twelve months weren't great for Senseonics Holdings shares, which cost holders 76%, while the market was up about 3.8%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Shareholders have lost 35% 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. Although Warren Buffett famously said he likes to 'buy when there is blood on the streets', he also focusses on high quality stocks with solid prospects. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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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