Investors one-year losses grow to 75% as the stock sheds US$616m this past week
As every investor would know, you don't hit a homerun every time you swing. But it should be a priority to avoid stomach churning catastrophes, wherever possible. So spare a thought for the long term shareholders of Invitae Corporation (NYSE:NVTA); the share price is down a whopping 75% in the last twelve months. That'd be a striking reminder about the importance of diversification. However, the longer term returns haven't been so bad, with the stock down 11% in the last three years. The falls have accelerated recently, with the share price down 52% in the last three months.
Since Invitae has shed US$616m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
See our latest analysis for Invitae
Because Invitae 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.
Invitae grew its revenue by 77% over the last year. That's a strong result which is better than most other loss making companies. So on the face of it we're really surprised to see the share price down 75% over twelve months. Something weird is definitely impacting the stock price; we'd venture the company has destroyed value somehow. What is clear is that the market is not judging the company on its revenue growth right now. Of course, markets do over-react so share price drop may be too harsh.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Invitae is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
Investors in Invitae had a tough year, with a total loss of 75%, against a market gain of about 15%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 7%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. For example, we've discovered 4 warning signs for Invitae (1 is a bit unpleasant!) that you should be aware of before investing here.
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.
