While it may not be enough for some shareholders, we think it is good to see the Roivant Sciences Ltd. (NASDAQ:ROIV) share price up 26% in a single quarter. But that isn't much consolation to those who have suffered through the declines of the last year. During that time the share price has sank like a stone, descending 56%. So the bounce should be viewed in that context. It may be that the fall was an overreaction.
While the stock has risen 16% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.
Given that Roivant Sciences 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last twelve months, Roivant Sciences increased its revenue by 132%. That's a strong result which is better than most other loss making companies. In contrast the share price is down 56% over twelve months. Yes, the market can be a fickle mistress. Typically a growth stock like this will be volatile, with some shareholders concerned about the red ink on the bottom line (that is, the losses). Generally speaking investors would consider a stock like this less risky once it turns a profit. But when do you think that will happen?
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
We doubt Roivant Sciences shareholders are happy with the loss of 56% over twelve months. That falls short of the market, which lost 8.9%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. It's great to see a nice little 26% rebound in the last three months. Let's just hope this isn't the widely-feared 'dead cat bounce' (which would indicate further declines to come). 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. To that end, you should be aware of the 2 warning signs we've spotted with Roivant Sciences .
But note: Roivant Sciences may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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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