Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. Active investors aim to buy stocks that vastly outperform the market – but in the process, they risk under-performance. That downside risk was realized by Immatics N.V. (NASDAQ:IMTX) shareholders over the last year, as the share price declined 37%. That contrasts poorly with the market decline of 6.9%. At least the damage isn’t so bad if you look at the last three years, since the stock is down 21% in that time. Furthermore, it’s down 20% in about a quarter. That’s not much fun for holders. But this could be related to the weak market, which is down 9.8% in the same period.
So let’s have a look and see if the longer term performance of the company has been in line with the underlying business’ progress.
Because Immatics 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. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last twelve months, Immatics increased its revenue by 11%. While that may seem decent it isn’t great considering the company is still making a loss. Given this fairly low revenue growth (and lack of profits), it’s not particularly surprising to see the stock down 37% in a year. It’s important not to lose sight of the fact that profitless companies must grow. So remember, if you buy a profitless company then you risk being a profitless investor.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
The last twelve months weren’t great for Immatics shares, which performed worse than the market, costing holders 37%. The market shed around 6.9%, no doubt weighing on the stock price. The three-year loss of 6% per year isn’t as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Baron Rothschild famously said to “buy when there’s blood in the streets, even if the blood is your own”, he also focusses on high quality stocks with solid prospects. 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. Case in point: We’ve spotted 1 warning sign for Immatics you should be aware of.
If you are like me, then you will 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.