Every investor on earth makes bad calls sometimes. But you want to avoid the really big losses like the plague. So take a moment to sympathize with the long term shareholders of Biomm S.A. (BVMF:BIOM3), who have seen the share price tank a massive 72% over a three year period. That'd be enough to cause even the strongest minds some disquiet. And over the last year the share price fell 41%, so we doubt many shareholders are delighted. Shareholders have had an even rougher run lately, with the share price down 21% in the last 90 days.
If the past week is anything to go by, investor sentiment for Biomm isn't positive, so let's see if there's a mismatch between fundamentals and the share price.
Biomm 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. 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.
Over three years, Biomm grew revenue at 32% per year. That is faster than most pre-profit companies. So on the face of it we're really surprised to see the share price down 20% a year in the same time period. 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).
If you are thinking of buying or selling Biomm stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
While the broader market lost about 2.5% in the twelve months, Biomm shareholders did even worse, losing 41%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 8% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Biomm better, we need to consider many other factors. Even so, be aware that Biomm is showing 5 warning signs in our investment analysis , and 2 of those are a bit concerning...
We will like Biomm 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 Brazilian 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.