Recent 11% pullback isn't enough to hurt long-term Gattaca (LON:GATC) shareholders, they're still up 256% over 1 year

By
Simply Wall St
Published
September 07, 2021
AIM:GATC
Source: Shutterstock

Gattaca plc (LON:GATC) shareholders have seen the share price descend 18% over the month. But that doesn't change the fact that the returns over the last year have been very strong. During that period, the share price soared a full 256%. So we think most shareholders won't be too upset about the recent fall. Investors should be wondering whether the business itself has the fundamental value required to continue to drive gains.

Although Gattaca has shed UK£8.1m 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 Gattaca

Gattaca 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. 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 year Gattaca saw its revenue shrink by 27%. So we would not have expected the share price to rise 256%. This is a good example of how buyers can push up prices even before the fundamental metrics show much growth. It's quite likely the revenue fall was already priced in, anyway.

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

earnings-and-revenue-growth
AIM:GATC Earnings and Revenue Growth September 8th 2021

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free report showing analyst forecasts should help you form a view on Gattaca

A Different Perspective

It's nice to see that Gattaca shareholders have received a total shareholder return of 256% over the last year. There's no doubt those recent returns are much better than the TSR loss of 7% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. 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 instance, we've identified 3 warning signs for Gattaca (1 is a bit concerning) that you should be aware of.

Gattaca is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.

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