Despite currently being unprofitable, Avacta Group (LON:AVCT) has delivered a 110% return to shareholders over 5 years

Avacta Group Plc (LON:AVCT) shareholders might understandably be very concerned that the share price has dropped 32% in the last quarter. But in stark contrast, the returns over the last half decade have impressed. We think most investors would be happy with the 110% return, over that period. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Ultimately business performance will determine whether the stock price continues the positive long term trend. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 46% drop, in the last year.

Since the long term performance has been good but there's been a recent pullback of 13%, let's check if the fundamentals match the share price.

View our latest analysis for Avacta Group

Avacta Group isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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.

For the last half decade, Avacta Group can boast revenue growth at a rate of 34% per year. That's well above most pre-profit companies. Meanwhile, its share price performance certainly reflects the strong growth, given the share price grew at 16% per year, compound, during the period. This suggests the market has well and truly recognized the progress the business has made. Avacta Group seems like a high growth stock - so growth investors might want to add it to their watchlist.

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free report showing analyst forecasts should help you form a view on Avacta Group

A Different Perspective

While the broader market lost about 0.8% in the twelve months, Avacta Group shareholders did even worse, losing 46%. 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. On the bright side, long term shareholders have made money, with a gain of 16% 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. To that end, you should learn about the 3 warning signs we've spotted with Avacta Group (including 1 which shouldn't be ignored) .

Of course Avacta Group may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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