Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Unfortunately the 23andMe Holding Co. (NASDAQ:ME) share price slid 11% over twelve months. That falls noticeably short of the market return of around 26%. 23andMe Holding may have better days ahead, of course; we've only looked at a one year period. And the share price decline continued over the last week, dropping some 20%.
Since 23andMe Holding has shed US$945m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
23andMe Holding 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In just one year 23andMe Holding saw its revenue fall by 5.9%. That's not what investors generally want to see. The stock price has languished lately, falling 11% in a year. That seems pretty reasonable given the lack of both profits and revenue growth. We think most holders must believe revenue growth will improve, or else costs will decline.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Take a more thorough look at 23andMe Holding's financial health with this free report on its balance sheet.
A Different Perspective
While 23andMe Holding shareholders are down 11% for the year, the market itself is up 26%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. Putting aside the last twelve months, it's good to see the share price has rebounded by 1.0%, in the last ninety days. Let's just hope this isn't the widely-feared 'dead cat bounce' (which would indicate further declines to come). It's always interesting to track share price performance over the longer term. But to understand 23andMe Holding better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with 23andMe Holding (including 1 which doesn't sit too well with us) .
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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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