It's not a secret that every investor will make bad investments, from time to time. But it's not unreasonable to try to avoid truly shocking capital losses. So we hope that those who held Finch Therapeutics Group, Inc. (NASDAQ:FNCH) during the last year don't lose the lesson, in addition to the 75% hit to the value of their shares. While some investors are willing to stomach this sort of loss, they are usually professionals who spread their bets thinly. Finch Therapeutics Group hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. Shareholders have had an even rougher run lately, with the share price down 56% in the last 90 days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
After losing 16% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
Because Finch Therapeutics Group 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. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last twelve months, Finch Therapeutics Group increased its revenue by 140%. That's well above most other pre-profit companies. So on the face of it we're really surprised to see the share price down 75% over twelve months. 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 image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. You can see what analysts are predicting for Finch Therapeutics Group in this interactive graph of future profit estimates.
A Different Perspective
While Finch Therapeutics Group shareholders are down 75% for the year, the market itself is up 0.4%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 56% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. It's always interesting to track share price performance over the longer term. But to understand Finch Therapeutics Group better, we need to consider many other factors. For instance, we've identified 3 warning signs for Finch Therapeutics Group (1 doesn't sit too well with us) that you should be aware of.
There are plenty of other companies that have insiders buying up shares. You probably do 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.
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.