If you love investing in stocks you’re bound to buy some losers. But long term Eton Pharmaceuticals, Inc. (NASDAQ:ETON) shareholders have had a particularly rough ride in the last three year. Regrettably, they have had to cope with a 62% drop in the share price over that period. And over the last year the share price fell 57%, so we doubt many shareholders are delighted. Shareholders have had an even rougher run lately, with the share price down 24% in the last 90 days.
With that in mind, it’s worth seeing if the company’s underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Because Eton Pharmaceuticals 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. That’s because it’s hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last three years, Eton Pharmaceuticals saw its revenue grow by 107% per year, compound. That’s well above most other pre-profit companies. In contrast, the share price is down 18% compound, over three years – disappointing by most standards. This could mean hype has come out of the stock because the losses are concerning investors. When we see revenue growth, paired with a falling share price, we can’t help wonder if there is an opportunity for those who are willing to dig deeper.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this freeinteractive graphic.
A Different Perspective
The last twelve months weren’t great for Eton Pharmaceuticals shares, which performed worse than the market, costing holders 57%. The market shed around 16%, no doubt weighing on the stock price. The three-year loss of 18% 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. 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. For instance, we’ve identified 3 warning signs for Eton Pharmaceuticals that you should be aware of.
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.