Some stocks are best avoided. We don't wish catastrophic capital loss on anyone. Anyone who held Organovo Holdings, Inc. (NASDAQ:ONVO) for five years would be nursing their metaphorical wounds since the share price dropped 83% in that time. And some of the more recent buyers are probably worried, too, with the stock falling 21% in the last year. Unhappily, the share price slid 2.2% in the last week.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
Because Organovo Holdings is loss-making, 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.
In the last half decade, Organovo Holdings saw its revenue increase by 43% per year. That's well above most other pre-profit companies. So it's not at all clear to us why the share price sunk 30% throughout that time. You'd have to assume the market is worried that profits won't come soon enough. We'd recommend carefully checking for indications of future growth - and balance sheet threats - before considering a purchase.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Organovo Holdings shareholders are down 21% for the year, but the market itself is up 10%. 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. Unfortunately, longer term shareholders are suffering worse, given the loss of 30% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
But note: Organovo Holdings 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.