As every investor would know, you don't hit a homerun every time you swing. But serious investors should think long and hard about avoiding extreme losses. So spare a thought for the long term shareholders of Oak Street Health, Inc. (NYSE:OSH); the share price is down a whopping 73% in the last twelve months. That'd be a striking reminder about the importance of diversification. Oak Street Health hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. Furthermore, it's down 53% in about a quarter. That's not much fun for holders.
Since Oak Street Health has shed US$699m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
Because Oak Street Health made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last twelve months, Oak Street Health increased its revenue by 59%. That's well above most other pre-profit companies. So the hefty 73% share price crash makes us think the company has somehow offended market participants. Something weird is definitely impacting the stock price; we'd venture the company has destroyed value somehow. What is clear is that the market is not judging the company on its revenue growth right now. Of course, markets do over-react so share price drop may be too harsh.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Oak Street Health is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.
A Different Perspective
Given that the market gained 2.0% in the last year, Oak Street Health shareholders might be miffed that they lost 73%. 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. The share price decline has continued throughout the most recent three months, down 53%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. 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 3 warning signs for Oak Street Health you should be aware of.
But note: Oak Street Health may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.