Investing in stocks comes with the risk that the share price will fall. Unfortunately, shareholders of SomaLogic, Inc. (NASDAQ:SLGC) have suffered share price declines over the last year. To wit the share price is down 65% in that time. SomaLogic hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. Even worse, it's down 23% in about a month, which isn't fun at all.
If the past week is anything to go by, investor sentiment for SomaLogic isn't positive, so let's see if there's a mismatch between fundamentals and the share price.
SomaLogic isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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.
SomaLogic grew its revenue by 25% over the last year. We think that is pretty nice growth. Meanwhile, the share price tanked 65%, suggesting the market had much higher expectations. It may well be that the business remains approximately on track, but its revenue growth has simply been delayed. For us it's important to consider when you think a company will become profitable, if you're basing your valuation on revenue.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. This free report showing analyst forecasts should help you form a view on SomaLogic
A Different Perspective
SomaLogic shareholders are down 65% for the year, even worse than the market loss of 12%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. With the stock down 7.0% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. It's always interesting to track share price performance over the longer term. But to understand SomaLogic better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for SomaLogic you should be aware of, and 1 of them can't be ignored.
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.
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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.
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