While some are satisfied with an index fund, active investors aim to find truly magnificent investments on the stock market. While not every stock performs well, when investors win, they can win big. In the case of Seres Therapeutics, Inc. (NASDAQ:MCRB), the share price is up an incredible 806% in the last year alone. On top of that, the share price is up 656% in about a quarter. Looking back further, the stock price is 202% higher than it was three years ago.
It really delights us to see such great share price performance for investors.
Because Seres Therapeutics 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 year Seres Therapeutics saw its revenue shrink by 27%. So it's very confusing to see that the share price gained a whopping 806%. There can be no doubt this kind of decoupling of revenue growth and share price growth is unusual to see in loss making companies. Typically, when we see this in a biotech stock, it's because investors are getting excited about an impending drug development milestone, such as clinical trial results. To us, a gain like this looks like speculation, but there might be historical trends to back it up.
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. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free report showing analyst forecasts should help you form a view on Seres Therapeutics
A Different Perspective
It's good to see that Seres Therapeutics has rewarded shareholders with a total shareholder return of 806% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 0.4% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. Even so, be aware that Seres Therapeutics is showing 3 warning signs in our investment analysis , you should know about...
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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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