AVITA Medical's (ASX:AVH) Wonderful 304% Share Price Increase Shows How Capitalism Can Build Wealth

The last three months have been tough on AVITA Medical, Inc. (ASX:AVH) shareholders, who have seen the share price decline a rather worrying 38%. But over the last three years the stock has shone bright like a diamond. Over that time, we've been excited to watch the share price climb an impressive 304%. So you might argue that the recent reduction in the share price is unremarkable in light of the longer term performance. The share price action could signify that the business itself is dramatically improved, in that time.

View our latest analysis for AVITA Medical

Because AVITA Medical 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last 3 years AVITA Medical saw its revenue grow at 92% per year. That's much better than most loss-making companies. In light of this attractive revenue growth, it seems somewhat appropriate that the share price has been rocketing, boasting a gain of 59% per year, over the same period. It's always tempting to take profits after a share price gain like that, but high-growth companies like AVITA Medical can sometimes sustain strong growth for many years. So we'd recommend you take a closer look at this one, or even put it on your watchlist.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

This free interactive report on AVITA Medical's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Investors in AVITA Medical had a tough year, with a total loss of 62%, against a market gain of about 3.2%. 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 24% 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. 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. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for AVITA Medical you should know about.

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 AU exchanges.

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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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