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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 we hope that those who held Seres Therapeutics, Inc. (NASDAQ:MCRB) during the last year don't lose the lesson, in addition to the 75% hit to the value of their shares. That'd be enough to make even the strongest stomachs churn. However, the longer term returns haven't been so bad, with the stock down 26% in the last three years. The falls have accelerated recently, with the share price down 71% in the last three months. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
Given that Seres Therapeutics didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Seres Therapeutics grew its revenue by 3.7% over the last year. That's not a very high growth rate considering it doesn't make profits. Nonetheless, it's fair to say the 75% share price implosion is unexpected.. We'd venture this growth was too low to give holders confidence that profitability is on the horizon. But if it will make money, albeit later than previously believed, this could be an opportunity.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
Seres Therapeutics shareholders are down 75% for the year, but the market itself is up 33%. 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, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 3 warning signs for Seres Therapeutics you should be aware of.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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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