As every investor would know, you don’t hit a homerun every time you swing. But it’s not unreasonable to try to avoid truly shocking capital losses. It must have been painful to be a 10x Genomics, Inc. (NASDAQ:TXG) shareholder over the last year, since the stock price plummeted 75% in that time. That’d be enough to make even the strongest stomachs churn. 10x Genomics may have better days ahead, of course; we’ve only looked at a one year period. The falls have accelerated recently, with the share price down 42% in the last three months. However, one could argue that the price has been influenced by the general market, which is down 17% in the same timeframe.
Since 10x Genomics has shed US$314m from its value in the past 7 days, let’s see if the longer term decline has been driven by the business’ economics.
View our latest analysis for 10x Genomics
Because 10x Genomics made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last year 10x Genomics saw its revenue grow by 50%. That’s a strong result which is better than most other loss making companies. So on the face of it we’re really surprised to see the share price down 75% over twelve months. There’s clearly something unusual going on here such as an acquisition that hasn’t delivered expected profits. What is clear is that the market is not judging the company on its revenue growth right now. Of course, investors do over-react when they are stressed out, so the sell-off could be unjustifiably severe.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Take a more thorough look at 10x Genomics’ financial health with this free report on its balance sheet.
A Different Perspective
We doubt 10x Genomics shareholders are happy with the loss of 75% over twelve months. That falls short of the market, which lost 20%. That’s disappointing, but it’s worth keeping in mind that the market-wide selling wouldn’t have helped. The share price decline has continued throughout the most recent three months, down 42%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we’d remain pretty wary until we see some strong business performance. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we’ve discovered 3 warning signs for 10x Genomics that you should be aware of before investing here.
But note: 10x Genomics may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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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