While shareholders of AB Science (EPA:AB) are in the black over 3 years, those who bought a week ago aren't so fortunate

By
Simply Wall St
Published
January 20, 2022
ENXTPA:AB
Source: Shutterstock

While AB Science S.A. (EPA:AB) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 20% in the last quarter. But that doesn't undermine the rather lovely longer-term return, if you measure over the last three years. In fact, the share price is up a full 180% compared to three years ago. To some, the recent share price pullback wouldn't be surprising after such a good run. The thing to consider is whether the underlying business is doing well enough to support the current price.

Although AB Science has shed €67m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

Check out our latest analysis for AB Science

Given that AB Science didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

AB Science actually saw its revenue drop by 3.5% per year over three years. So we wouldn't have expected the share price to gain 41% per year, but it has. It's fair to say shareholders are definitely counting on a bright future.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
ENXTPA:AB Earnings and Revenue Growth January 20th 2022

Take a more thorough look at AB Science's financial health with this free report on its balance sheet.

A Different Perspective

AB Science shareholders are down 36% for the year, but the market itself is up 27%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 4 warning signs for AB Science that you should be aware of before investing here.

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 FR exchanges.

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