Stock Analysis

Shareholders have faith in loss-making Veracyte (NASDAQ:VCYT) as stock climbs 9.9% in past week, taking five-year gain to 111%

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NasdaqGM:VCYT
Source: Shutterstock

It hasn't been the best quarter for Veracyte, Inc. (NASDAQ:VCYT) shareholders, since the share price has fallen 22% in that time. But that doesn't change the fact that the returns over the last five years have been very strong. Indeed, the share price is up an impressive 111% in that time. We think it's more important to dwell on the long term returns than the short term returns. Of course, that doesn't necessarily mean it's cheap now. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 58% drop, in the last year.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

View our latest analysis for Veracyte

Given that Veracyte didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

For the last half decade, Veracyte can boast revenue growth at a rate of 26% per year. Even measured against other revenue-focussed companies, that's a good result. So it's not entirely surprising that the share price reflected this performance by increasing at a rate of 16% per year, in that time. This suggests the market has well and truly recognized the progress the business has made. To our minds that makes Veracyte worth investigating - it may have its best days ahead.

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

earnings-and-revenue-growth
NasdaqGM:VCYT Earnings and Revenue Growth October 5th 2022

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. If you are thinking of buying or selling Veracyte stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

While the broader market lost about 17% in the twelve months, Veracyte shareholders did even worse, losing 58%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 16%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Veracyte better, we need to consider many other factors. For example, we've discovered 2 warning signs for Veracyte that you should be aware of before investing here.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

Valuation is complex, but we're helping make it simple.

Find out whether Veracyte is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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About NasdaqGM:VCYT

Veracyte

Veracyte, Inc. operates as a diagnostics company worldwide.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation2
Future Growth1
Past Performance0
Financial Health5
Dividends0

Read more about these checks in the individual report sections or in our analysis model.

Excellent balance sheet and slightly overvalued.