It's not a secret that every investor will make bad investments, from time to time. But serious investors should think long and hard about avoiding extreme losses. We wouldn't blame Bionano Genomics, Inc. (NASDAQ:BNGO) shareholders if they were still in shock after the stock dropped like a lead balloon, down 84% in just one year. While some investors are willing to stomach this sort of loss, they are usually professionals who spread their bets thinly. Even if you look out three years, the returns are still disappointing, with the share price down49% in that time. Shareholders have had an even rougher run lately, with the share price down 54% in the last 90 days. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
Since Bionano Genomics has shed US$87m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
Because Bionano Genomics 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. 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 Bionano Genomics saw its revenue grow by 115%. That's a strong result which is better than most other loss making companies. So the hefty 84% 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.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free report showing analyst forecasts should help you form a view on Bionano Genomics
A Different Perspective
The last twelve months weren't great for Bionano Genomics shares, which cost holders 84%, while the market was up about 2.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The three-year loss of 14% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. It's always interesting to track share price performance over the longer term. But to understand Bionano Genomics better, we need to consider many other factors. Take risks, for example - Bionano Genomics has 3 warning signs we think 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 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.