It is doubtless a positive to see that the Jounce Therapeutics, Inc. (NASDAQ:JNCE) share price has gained some 47% in the last three months. But that is meagre solace when you consider how the price has plummeted over the last year. To wit, the stock has dropped 80% over the last year. It’s not uncommon to see a bounce after a drop like that. The bigger issue is whether the company can sustain the momentum in the long term.
Jounce Therapeutics isn’t a profitable company, so it is unlikely we’ll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Jounce Therapeutics’s revenue didn’t grow at all in the last year. In fact, it fell 9.0%. That’s not what investors generally want to see. The share price fall of 80% in a year tells the story. Holders should not lose the lesson: loss making companies should grow revenue. Of course, extreme share price falls can be an opportunity for those who are willing to really dig deeper to understand a high risk company like this.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
Take a more thorough look at Jounce Therapeutics’s financial health with this free report on its balance sheet.
A Different Perspective
Given that the market gained 1.4% in the last year, Jounce Therapeutics shareholders might be miffed that they lost 80%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Putting aside the last twelve months, it’s good to see the share price has rebounded by 47%, in the last ninety days. This could just be a bounce because the selling was too aggressive, but fingers crossed it’s the start of a new trend. If you would like to research Jounce Therapeutics in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
We will like Jounce Therapeutics better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, 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.
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