Long term investing is the way to go, but that doesn’t mean you should hold every stock forever. We really hate to see fellow investors lose their hard-earned money. Imagine if you held Selecta Biosciences, Inc. (NASDAQ:SELB) for half a decade as the share price tanked 89%. We also note that the stock has performed poorly over the last year, with the share price down 68%. The falls have accelerated recently, with the share price down 32% in the last three months. While a drop like that is definitely a body blow, money isn’t as important as health and happiness.
Since Selecta Biosciences has shed US$38m from its value in the past 7 days, let’s see if the longer term decline has been driven by the business’ economics.
Check out our latest analysis for Selecta Biosciences
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Selecta Biosciences became profitable within the last five years. Most would consider that to be a good thing, so it’s counter-intuitive to see the share price declining. Other metrics may better explain the share price move.
Revenue is actually up 79% over the time period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. This free report showing analyst forecasts should help you form a view on Selecta Biosciences
A Different Perspective
While the broader market lost about 21% in the twelve months, Selecta Biosciences shareholders did even worse, losing 68%. Having said that, it’s inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 14% over the last half decade. We realise that Baron Rothschild has said investors should “buy when there is blood on the streets”, but we caution that investors should first be sure they are buying a high quality business. 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 instance, we’ve identified 2 warning signs for Selecta Biosciences (1 can’t be ignored) that you should be aware of.
Selecta Biosciences is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
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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Read More: Shareholders in Selecta Biosciences (NASDAQ:SELB) have lost 89%, as stock drops 19% this