Investors push Veracyte (NASDAQ:VCYT) 5.5% lower this week, company's increasing losses might be to blame

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Veracyte, Inc. (NASDAQ:VCYT) share price is 43% higher than it was a year ago, much better than the market return of around 31% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! On the other hand, longer term shareholders have had a tougher run, with the stock falling 27% in three years.

In light of the stock dropping 5.5% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive one-year return.

Check out our latest analysis for Veracyte

Veracyte 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. 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.

Over the last twelve months, Veracyte's revenue grew by 22%. That's a fairly respectable growth rate. Buyers pushed the share price 43% in response, which isn't unreasonable. If the company can maintain the revenue growth, the share price could go higher still. But before deciding this growth stock is underappreciated, you might want to check out profitability trends (and cash flow)

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

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

A Different Perspective

It's nice to see that Veracyte shareholders have received a total shareholder return of 43% over the last year. That gain is better than the annual TSR over five years, which is 6%. Therefore it seems like sentiment around the company has been positive lately. 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Veracyte you should know about.

For those who like to find winning investments this free list of undervalued 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 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.