Investors are selling off 10x Genomics (NASDAQ:TXG), lack of profits no doubt contribute to shareholders one-year loss

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. For example, the 10x Genomics, Inc. (NASDAQ:TXG) share price is down 18% in the last year. That's disappointing when you consider the market returned 16%. 10x Genomics may have better days ahead, of course; we've only looked at a one year period. Shareholders have had an even rougher run lately, with the share price down 16% in the last 90 days.

Since 10x Genomics has shed US$2.2b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Given that 10x Genomics 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

10x Genomics grew its revenue by 75% over the last year. That's a strong result which is better than most other loss making companies. Given the revenue growth, the share price drop of 18% seems quite harsh. Our sympathies to shareholders who are now underwater. Prima facie, revenue growth like that should be a good thing, so it's worth checking whether losses have stabilized. Our monkey brains haven't evolved to think exponentially, so humans do tend to underestimate companies that have exponential growth.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

If you are thinking of buying or selling 10x Genomics stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While 10x Genomics shareholders are down 18% for the year, the market itself is up 16%. 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. With the stock down 16% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 3 warning signs for 10x Genomics that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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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