Even the best stock pickers will make plenty of bad investments. And there's no doubt that Avid Bioservices, Inc. (NASDAQ:CDMO) stock has had a really bad year. In that relatively short period, the share price has plunged 66%. We note that it has not been easy for shareholders over three years, either; the share price is down 41% in that time. Furthermore, it's down 59% in about a quarter. That's not much fun for holders.
Since Avid Bioservices has shed US$76m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
View our latest analysis for Avid Bioservices
Avid Bioservices wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Avid Bioservices grew its revenue by 20% over the last year. That's definitely a respectable growth rate. Meanwhile, the share price tanked 66%, suggesting the market had much higher expectations. It may well be that the business remains approximately on track, but its revenue growth has simply been delayed. For us it's important to consider when you think a company will become profitable, if you're basing your valuation on revenue.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. If you are thinking of buying or selling Avid Bioservices stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
Avid Bioservices shareholders are down 66% for the year, but the market itself is up 9.8%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 2% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Avid Bioservices by clicking this link.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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.