Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. That downside risk was realized by ImmunoPrecise Antibodies Ltd. (CVE:IPA) shareholders over the last year, as the share price declined 12%. That’s disappointing when you consider the market returned 6.0%. We wouldn’t rush to judgement on ImmunoPrecise Antibodies because we don’t have a long term history to look at.
ImmunoPrecise Antibodies isn’t a profitable company, so 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. When a company doesn’t make profits, we’d generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last twelve months, ImmunoPrecise Antibodies increased its revenue by 139%. That’s a strong result which is better than most other loss making companies. The share price drop of 12% over twelve months would be considered disappointing by many, so you might argue the company is getting little credit for its impressive revenue growth. On the bright side, if this company is moving profits in the right direction, top-line growth like that could be an opportunity. Our monkey brains haven’t evolved to think exponentially, so humans do tend to underestimate companies that have exponential growth.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
It’s probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. You can see what analysts are predicting for ImmunoPrecise Antibodies in this interactive graph of future profit estimates.
A Different Perspective
Given that the market gained 6.0% in the last year, ImmunoPrecise Antibodies shareholders might be miffed that they lost 12%. While the aim is to do better than that, it’s worth recalling that even great long-term investments sometimes underperform for a year or more. It’s great to see a nice little 4.2% rebound in the last three months. This could just be a bounce because the selling was too aggressive, but fingers crossed it’s the start of a new trend. If you would like to research ImmunoPrecise Antibodies in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
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