It's not possible to invest over long periods without making some bad investments. But you have a problem if you face massive losses more than once in a while. So take a moment to sympathize with the long term shareholders of Pacific Biosciences of California, Inc. (NASDAQ:PACB), who have seen the share price tank a massive 84% over a three year period. That would certainly shake our confidence in the decision to own the stock. The more recent news is of little comfort, with the share price down 46% in a year. Shareholders have had an even rougher run lately, with the share price down 43% in the last 90 days. 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. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
With the stock having lost 13% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
Pacific Biosciences of California 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.
Over three years, Pacific Biosciences of California grew revenue at 22% per year. That's well above most other pre-profit companies. So why has the share priced crashed 23% per year, in the same time? The share price makes us wonder if there is an issue with profitability. Ultimately, revenue growth doesn't amount to much if the business can't scale well. If the company is low on cash, it may have to raise capital soon.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Pacific Biosciences of California is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
Investors in Pacific Biosciences of California had a tough year, with a total loss of 46%, against a market gain of about 29%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 6% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Even so, be aware that Pacific Biosciences of California is showing 4 warning signs in our investment analysis , you should know about...
But note: Pacific Biosciences of California may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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.