The Veracyte, Inc. (NASDAQ:VCYT) share price has had a bad week, falling 10%. But that doesn't undermine the rather lovely longer-term return, if you measure over the last three years. In fact, the share price is up a full 297% compared to three years ago. After a run like that some may not be surprised to see prices moderate. Only time will tell if there is still too much optimism currently reflected in the share price.
Veracyte 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. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Over the last three years Veracyte has grown its revenue at 19% annually. That's a very respectable growth rate. It's fair to say that the market has acknowledged the growth by pushing the share price up 58% per year. The business has made good progress on the top line, but the market is extrapolating the growth. Some investors like to buy in just after a company becomes profitable, since that can be a powerful inflexion point.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
Take a more thorough look at Veracyte's financial health with this free report on its balance sheet.
A Different Perspective
It's good to see that Veracyte has rewarded shareholders with a total shareholder return of 276% in the last twelve months. That gain is better than the annual TSR over five years, which is 12%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
But note: Veracyte 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.
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