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It is doubtless a positive to see that the Dermira, Inc. (NASDAQ:DERM) share price has gained some 52% in the last three months. But over the last three years we've seen a quite serious decline. Indeed, the share price is down a tragic 63% in the last three years. So it's good to see it climbing back up. While many would remain nervous, there could be further gains if the business can put its best foot forward.
Dermira isn't a profitable company, so it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over three years, Dermira grew revenue at 56% per year. That's well above most other pre-profit companies. In contrast, the share price is down 28% 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.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
This free interactive report on Dermira's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Dermira produced a TSR of 3.9% over the last year. It's always nice to make money but this return falls short of the market return which was about 8.1% for the year. The silver lining is that the recent rise is far preferable to the annual loss of 28% that shareholders have suffered over the last three years. We hope the turnaround in fortunes continues. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
Of course Dermira may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.