Yahoo Finance Strong week for Rockley Photonics Holdings (NYSE:RKLY) shareholders doesn't alleviate pain of one-year loss
This week we saw the Rockley Photonics Holdings Limited (NYSE:RKLY) share price climb by 18%. But that's small comfort given the dismal price performance over the last year. Like an arid lake in a warming world, shareholder value has evaporated, with the share price down 67% in that time. So the bounce should be viewed in that context. Arguably, the fall was overdone.
While the last year has been tough for Rockley Photonics Holdings shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.
View our latest analysis for Rockley Photonics Holdings
Because Rockley Photonics Holdings made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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.
In just one year Rockley Photonics Holdings saw its revenue fall by 58%. That looks like a train-wreck result to investors far and wide. It's no surprise, then, that investors dumped the stock like it was garbage, sending the share price down 67%. Buying shares in companies that lose money, shrink revenue, and see share price declines is unpopular with investors, but popular with speculators (apparently). This company will really need to improve on the numbers before we get excited about it.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. This free report showing analyst forecasts should help you form a view on Rockley Photonics Holdings
A Different Perspective
While Rockley Photonics Holdings shareholders are down 67% for the year, the market itself is up 9.5%. 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 50% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. 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 Rockley Photonics Holdings (1 is a bit concerning) that you should be aware of.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are 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.
