Even after rising 22% this past week, Pacific Biosciences of California (NASDAQ:PACB) shareholders are still down 71% over the past three years

Pacific Biosciences of California, Inc. (NASDAQ:PACB) shareholders will doubtless be very grateful to see the share price up 51% in the last month. But that is meagre solace in the face of the shocking decline over three years. The share price has sunk like a leaky ship, down 71% in that time. So it's about time shareholders saw some gains. But the more important question is whether the underlying business can justify a higher price still.

On a more encouraging note the company has added US$81m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

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Because Pacific Biosciences of California 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 hope to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

In the last three years, Pacific Biosciences of California saw its revenue grow by 9.6% per year, compound. That's a pretty good rate of top-line growth. So it seems unlikely the 20% share price drop (each year) is entirely about the revenue. More likely, the market was spooked by the cost of that revenue. This is exactly why investors need to diversify - even when a loss making company grows revenue, it can fail to deliver for shareholders.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Pacific Biosciences of California is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think Pacific Biosciences of California will earn in the future (free analyst consensus estimates)

A Different Perspective

Pacific Biosciences of California shareholders have received returns of 15% over twelve months, which isn't far from the general market return. The silver lining is that the share price is up in the short term, which flies in the face of the annualised loss of 10% over the last five years. While 'turnarounds seldom turn' there are green shoots for Pacific Biosciences of California. 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. Even so, be aware that Pacific Biosciences of California is showing 2 warning signs in our investment analysis , you should know about...

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

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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.