Increasing losses over year doesn't faze Castle Biosciences (NASDAQ:CSTL) investors as stock jumps 11% this past week
Castle Biosciences, Inc. (NASDAQ:CSTL) shareholders should be happy to see the share price up 11% in the last week. But that's small comfort given the dismal price performance over the last year. Like an arid lake in a warming world, shareholder value has evaporated, with the share price down 60% in that time. Some might say the recent bounce is to be expected after such a bad drop. Arguably, the fall was overdone.
On a more encouraging note the company has added US$67m to its market cap in just the last 7 days, so let's see if we can determine what's driven the one-year loss for shareholders.
View our latest analysis for Castle Biosciences
Because Castle Biosciences 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last year Castle Biosciences saw its revenue grow by 41%. That's definitely a respectable growth rate. Unfortunately it seems investors wanted more, because the share price is down 60% in that time. It is of course possible that the business will still deliver strong growth, it will just take longer than expected to do it. For us it's important to consider when you think a company will become profitable, if you're basing your valuation on revenue.
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 Castle Biosciences shares, which performed worse than the market, costing holders 60%. Meanwhile, the broader market slid about 25%, likely weighing on the stock. Investors are up over three years, booking 4% per year, much better than the more recent returns. Sometimes when a good quality long term winner has a weak period, it's turns out to be an opportunity, but you really need to be sure that the quality is there. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Castle Biosciences , and understanding them should be part of your investment process.
But note: Castle Biosciences 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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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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