Further weakness as Genscript Biotech (HKG:1548) drops 16% this week, taking three-year losses to 62%

If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. Long term Genscript Biotech Corporation (HKG:1548) shareholders know that all too well, since the share price is down considerably over three years. So they might be feeling emotional about the 62% share price collapse, in that time. The more recent news is of little comfort, with the share price down 43% in a year. Shareholders have had an even rougher run lately, with the share price down 30% in the last 90 days.

Since Genscript Biotech has shed HK$4.1b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for Genscript Biotech

Genscript Biotech isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually desire strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

Over three years, Genscript Biotech grew revenue at 24% per year. That's well above most other pre-profit companies. In contrast, the share price is down 17% compound, over three years - disappointing by most standards. It seems likely that the market is worried about the continual losses. When we see revenue growth, paired with a falling share price, we can't help wonder if there is an opportunity for those who are willing to dig deeper.

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

Genscript Biotech is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So it makes a lot of sense to check out what analysts think Genscript Biotech will earn in the future (free analyst consensus estimates)

A Different Perspective

Investors in Genscript Biotech had a tough year, with a total loss of 43%, against a market gain of about 7.7%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 7% 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. 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. Case in point: We've spotted 1 warning sign for Genscript Biotech you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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