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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 AbCellera Biologics Inc. (NASDAQ:ABCL) shareholder over the last year, since the stock price plummeted 71% in that time. A loss like this is a stark reminder that portfolio diversification is important. Because AbCellera Biologics hasn't been listed for many years, the market is still learning about how the business performs. Shareholders have had an even rougher run lately, with the share price down 12% in the last 90 days. Of course, this share price action may well have been influenced by the 6.2% decline in the broader market, throughout the period.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
Check out our latest analysis for AbCellera Biologics
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Unfortunately AbCellera Biologics reported an EPS drop of 32% for the last year. The share price decline of 71% is actually more than the EPS drop. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock. The less favorable sentiment is reflected in its current P/E ratio of 10.47.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
We doubt AbCellera Biologics shareholders are happy with the loss of 71% over twelve months. That falls short of the market, which lost 11%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. With the stock down 12% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. 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. Case in point: We've spotted 3 warning signs for AbCellera Biologics you should be aware of, and 1 of them makes us a bit uncomfortable.