It's nice to see the Codiak BioSciences, Inc. (NASDAQ:CDAK) share price up 15% in a 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 53% in that time. The share price recovery is not so impressive when you consider the fall. Arguably, the fall was overdone.
While the stock has risen 15% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.
Codiak BioSciences isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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.
Codiak BioSciences grew its revenue by 1,084% over the last year. That's well above most other pre-profit companies. In contrast the share price is down 53% over twelve months. Yes, the market can be a fickle mistress. Typically a growth stock like this will be volatile, with some shareholders concerned about the red ink on the bottom line (that is, the losses). Generally speaking investors would consider a stock like this less risky once it turns a profit. But when do you think that will happen?
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Take a more thorough look at Codiak BioSciences' financial health with this free report on its balance sheet.
A Different Perspective
Given that the market gained 23% in the last year, Codiak BioSciences shareholders might be miffed that they lost 53%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 16% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with Codiak BioSciences (at least 2 which are a bit concerning) , and understanding them should be part of your investment process.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.
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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.