Did Sangamo Therapeutics' (NASDAQ:SGMO) Share Price Deserve to Gain 70%?

By
Simply Wall St
Published
December 21, 2020

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But you can significantly boost your returns by picking above-average stocks. For example, the Sangamo Therapeutics, Inc. (NASDAQ:SGMO) share price is up 70% in the last year, clearly besting the market return of around 21% (not including dividends). That's a solid performance by our standards! In contrast, the longer term returns are negative, since the share price is 15% lower than it was three years ago.

View our latest analysis for Sangamo Therapeutics

Sangamo Therapeutics isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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.

Sangamo Therapeutics grew its revenue by 97% last year. That's a head and shoulders above most loss-making companies. While the share price gain of 70% over twelve months is pretty tasty, you might argue it doesn't fully reflect the strong revenue growth. So quite frankly it could be a good time to investigate Sangamo Therapeutics in some detail. Human beings have trouble conceptualizing (and valuing) exponential growth. Is that what we're seeing here?

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

NasdaqGS:SGMO Earnings and Revenue Growth December 21st 2020

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. You can see what analysts are predicting for Sangamo Therapeutics in this interactive graph of future profit estimates.

A Different Perspective

We're pleased to report that Sangamo Therapeutics shareholders have received a total shareholder return of 70% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 9% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. To that end, you should be aware of the 3 warning signs we've spotted with Sangamo Therapeutics .

Sangamo Therapeutics is not the only stock that insiders are buying. 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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This article by Simply Wall St is general in nature. 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.
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