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This week we saw the Wave Life Sciences Ltd. (NASDAQ:WVE) share price climb by 16%. But that is meagre solace in the face of the shocking decline over three years. Indeed, the share price is down a whopping 74% in the last three years. Arguably, the recent bounce is to be expected after such a bad drop. Of course the real question is whether the business can sustain a turnaround.
Because Wave Life Sciences 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last three years, Wave Life Sciences saw its revenue grow by 34% per year, compound. That's well above most other pre-profit companies. So why has the share priced crashed 20% per year, in the same time? The share price makes us wonder if there is an issue with profitability. Sometimes fast revenue growth doesn't lead to profits. If the company is low on cash, it may have to raise capital soon.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Take a more thorough look at Wave Life Sciences' financial health with this free report on its balance sheet.
A Different Perspective
Wave Life Sciences provided a TSR of 23% over the year. That's fairly close to the broader market return. The silver lining is that the share price is up in the short term, which flies in the face of the annualised loss of 6% over the last five years. While 'turnarounds seldom turn' there are green shoots for Wave Life Sciences. It's always interesting to track share price performance over the longer term. But to understand Wave Life Sciences better, we need to consider many other factors. To that end, you should be aware of the 3 warning signs we've spotted with Wave Life Sciences .
We will like Wave Life 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 US exchanges.
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. 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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