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Avacta Group Plc (LON:AVCT) shareholders might be concerned after seeing the share price drop 22% in the last quarter. But that scarcely detracts from the really solid long term returns generated by the company over five years. In fact, the share price is 163% higher today. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. Ultimately business performance will determine whether the stock price continues the positive long term trend. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 64% decline over the last twelve months.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
Check out our latest analysis for Avacta Group
Avacta Group 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. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last 5 years Avacta Group saw its revenue grow at 46% per year. That's well above most pre-profit companies. So it's not entirely surprising that the share price reflected this performance by increasing at a rate of 21% per year, in that time. So it seems likely that buyers have paid attention to the strong revenue growth. Avacta Group seems like a high growth stock - so growth investors might want to add it to their watchlist.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. If you are thinking of buying or selling Avacta Group stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
Investors in Avacta Group had a tough year, with a total loss of 64%, against a market gain of about 10%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 21% per year over half a decade. 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 Avacta Group better, we need to consider many other factors. Case in point: We've spotted 5 warning signs for Avacta Group you should be aware of, and 3 of them are a bit concerning.