Over the last month the Precision BioSciences, Inc. (NASDAQ:DTIL) has been much stronger than before, rebounding by 31%. But that doesn't change the fact that the returns over the last year have been stomach churning. Specifically, the stock price nose-dived 80% in that time. Arguably, the recent bounce is to be expected after such a bad drop. The real question is whether the company can turn around its fortunes. While a drop like that is definitely a body blow, money isn't as important as health and happiness.
Although the past week has been more reassuring for shareholders, they're still in the red over the last year, so let's see if the underlying business has been responsible for the decline.
Precision BioSciences 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. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In just one year Precision BioSciences saw its revenue fall by 63%. If you think that's a particularly bad result, you're statistically on the money If you need more proof of that, check the share price. (Hint: it tanked 80%). Our mindset doesn't have a lot of time for stocks like this. A healthy aversion to bagholding (holding potentially worthless stocks) sees many shareholders avoid buying shares like this, rightly or wrongly.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. You can see what analysts are predicting for Precision BioSciences in this interactive graph of future profit estimates.
A Different Perspective
Precision BioSciences shareholders are down 80% for the year, falling short of the market return. The market shed around 8.8%, no doubt weighing on the stock price. The three-year loss of 21% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. 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 Precision BioSciences is showing 3 warning signs in our investment analysis , and 2 of those make us uncomfortable...
Precision BioSciences is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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.
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