Cano Health, Inc. (NYSE:CANO) shareholders should be happy to see the share price up 10% in the last month. But that doesn’t change the fact that the returns over the last year have been stomach churning. Specifically, the stock price nose-dived 78% in that time. So it’s not that amazing to see a bit of a bounce. The important thing is whether the company can turn it around, longer term.
Since Cano Health has shed US$42m from its value in the past 7 days, let’s see if the longer term decline has been driven by the business’ economics.
See our latest analysis for Cano Health
Because Cano Health 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. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Cano Health grew its revenue by 85% over the last year. That’s a strong result which is better than most other loss making companies. So the hefty 78% share price crash makes us think the company has somehow offended market participants. Something weird is definitely impacting the stock price; we’d venture the company has destroyed value somehow. What is clear is that the market is not judging the company on its revenue growth right now. Of course, investors do over-react when they are stressed out, so the sell-off could be unjustifiably severe.
The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
We doubt Cano Health shareholders are happy with the loss of 78% over twelve months. That falls short of the market, which lost 7.9%. That’s disappointing, but it’s worth keeping in mind that the market-wide selling wouldn’t have helped. The share price decline has continued throughout the most recent three months, down 68%, suggesting an absence of enthusiasm from investors. 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. Like risks, for instance. Every company has them, and we’ve spotted 3 warning signs for Cano Health (of which 1 shouldn’t be ignored!) you should know about.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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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Find out whether Cano Health is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
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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.
