Swelling losses haven't held back gains for Roivant Sciences (NASDAQ:ROIV) shareholders since they're up 156% over 1 year
The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But if you pick the right business to buy shares in, you can make more than you can lose. Take, for example Roivant Sciences Ltd. (NASDAQ:ROIV). Its share price is already up an impressive 156% in the last twelve months. Also pleasing for shareholders was the 27% gain in the last three months. But this move may well have been assisted by the reasonably buoyant market (up 11% in 90 days). Note that businesses generally develop over the long term, so the returns over the last year might not reflect a long term trend.
While this past week has detracted from the company's one-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.
Check out our latest analysis for Roivant Sciences
Roivant Sciences isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over the last twelve months, Roivant Sciences' revenue grew by 11%. That's not a very high growth rate considering it doesn't make profits. So we wouldn't have expected the share price to rise by 156%. We're happy that investors have made money, though we wonder if the increase will be sustained. We're not so sure that revenue growth is driving the market optimism about the stock.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Roivant Sciences is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think Roivant Sciences will earn in the future (free analyst consensus estimates)
A Different Perspective
It's nice to see that Roivant Sciences shareholders have gained 156% over the last year. The more recent returns haven't been as impressive as the longer term returns, coming in at just 27%. It seems likely the market is waiting on fundamental developments with the business before pushing the share price higher (or lower). 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. To that end, you should be aware of the 2 warning signs we've spotted with Roivant Sciences .
We will like Roivant Sciences 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 American 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.
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