Even after rising 24% this past week, Editas Medicine (NASDAQ:EDIT) shareholders are still down 60% over the past year

By
Simply Wall St
Published
March 23, 2022
NasdaqGS:EDIT
Source: Shutterstock

This week we saw the Editas Medicine, Inc. (NASDAQ:EDIT) share price climb by 24%. But that doesn't change the fact that the returns over the last year have been disappointing. Like an arid lake in a warming world, shareholder value has evaporated, with the share price down 60% in that time. So the bounce should be viewed in that context. You could argue that the sell-off was too severe.

While the last year has been tough for Editas Medicine shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

See our latest analysis for Editas Medicine

Given that Editas Medicine didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually expect strong 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 just one year Editas Medicine saw its revenue fall by 72%. That looks like a train-wreck result to investors far and wide. Arguably, the market has responded appropriately to this performance by sending the share price down 60% in the same time period. Buying shares in companies that lose money, shrink revenue, and see share price declines is unpopular with investors, but popular with speculators (apparently). This company will really need to improve on the numbers before we get excited about it.

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

earnings-and-revenue-growth
NasdaqGS:EDIT Earnings and Revenue Growth March 23rd 2022

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. You can see what analysts are predicting for Editas Medicine in this interactive graph of future profit estimates.

A Different Perspective

Investors in Editas Medicine had a tough year, with a total loss of 60%, against a market gain of about 8.1%. 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 3% 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. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Editas Medicine (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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

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