Homology Medicines (NASDAQ:FIXX) shareholders have endured a 90% loss from investing in the stock three years ago
As an investor, mistakes are inevitable. But really big losses can really drag down an overall portfolio. So take a moment to sympathize with the long term shareholders of Homology Medicines, Inc. (NASDAQ:FIXX), who have seen the share price tank a massive 90% over a three year period. That'd be enough to cause even the strongest minds some disquiet. The more recent news is of little comfort, with the share price down 42% in a year. On the other hand the share price has bounced 6.0% over the last week. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
Check out our latest analysis for Homology Medicines
Because Homology Medicines made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over three years, Homology Medicines grew revenue at 40% per year. That is faster than most pre-profit companies. So why has the share priced crashed 24% per year, in the same time? You'd want to take a close look at the balance sheet, as well as the losses. Ultimately, revenue growth doesn't amount to much if the business can't scale well. If the company is low on cash, it may have to raise capital soon.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Take a more thorough look at Homology Medicines' financial health with this free report on its balance sheet.
A Different Perspective
Homology Medicines shareholders are down 42% for the year, falling short of the market return. The market shed around 8.7%, no doubt weighing on the stock price. Unfortunately, the longer term story isn't pretty, with investment losses running at 24% per year over three years. We'd need clear signs of growth in the underlying business before we could muster much enthusiasm for this one. It's always interesting to track share price performance over the longer term. But to understand Homology Medicines better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with Homology Medicines (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.
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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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.
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