Even the best stock pickers will make plenty of bad investments. Anyone who held Personalis, Inc. (NASDAQ:PSNL) over the last year knows what a loser feels like. To wit the share price is down 67% in that time. Personalis may have better days ahead, of course; we've only looked at a one year period. Shareholders have had an even rougher run lately, with the share price down 43% in the last 90 days.
Since Personalis has shed US$54m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
Personalis wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Personalis grew its revenue by 8.7% over the last year. While that may seem decent it isn't great considering the company is still making a loss. Without profits, and with revenue growth sluggish, you get a 67% loss for shareholders, over the year. We'd want to see evidence that future revenue growth will be stronger before getting too interested. Of course, the market can be too impatient at times. Why not take a closer look at this one so you're ready to pounce if growth does accelerate.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
This free interactive report on Personalis' balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Given that the market gained 2.0% in the last year, Personalis shareholders might be miffed that they lost 67%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. With the stock down 43% 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. 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. For instance, we've identified 5 warning signs for Personalis (1 is potentially serious) that you should be aware of.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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.