Imagine Owning T2 Biosystems While The Price Tanked 50%

T2 Biosystems, Inc. (NASDAQ:TTOO) shareholders should be happy to see the share price up 28% in the last month. But that is small recompense for the exasperating returns over three years. In that time, the share price dropped 50%. So it’s is really good to see an improvement. While many would remain nervous, there could be further gains if the business can put its best foot forward.

See our latest analysis for T2 Biosystems

T2 Biosystems 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.

Over three years, T2 Biosystems grew revenue at 42% per year. That is faster than most pre-profit companies. The share price has moved in quite the opposite direction, down 21% over that time, a bad result. It seems likely that the market is worried about the continual losses. But a share price drop of that magnitude could well signal that the market is overly negative on the stock.

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

NasdaqGM:TTOO Income Statement, March 1st 2019
NasdaqGM:TTOO Income Statement, March 1st 2019

Balance sheet strength is crucual. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

The last twelve months weren’t great for T2 Biosystems shares, which cost holders 32%, while the market was up about 5.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The three-year loss of 21% per year isn’t as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Warren Buffett famously said he likes to ‘buy when there is blood on the streets’, he also focusses on high quality stocks with solid prospects. Before spending more time on T2 Biosystems it might be wise to click here to see if insiders have been buying or selling shares.

Of course T2 Biosystems may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.