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Imagine Owning Aerie Pharmaceuticals (NASDAQ:AERI) While The Price Tanked 62%

Simply Wall St

The nature of investing is that you win some, and you lose some. And there's no doubt that Aerie Pharmaceuticals, Inc. (NASDAQ:AERI) stock has had a really bad year. The share price has slid 62% in that time. To make matters worse, the returns over three years have also been really disappointing (the share price is 37% lower than three years ago). The good news is that the stock is up 1.4% in the last week.

See our latest analysis for Aerie Pharmaceuticals

Given that Aerie Pharmaceuticals didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. 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 the last year Aerie Pharmaceuticals saw its revenue grow by 1899%. That's well above most other pre-profit companies. Meanwhile, the share price slid 62%. This could mean hype has come out of the stock because the bottom line is concerning investors. We'd definitely consider it a positive if the company is trending towards profitability. If you can see that happening, then perhaps consider adding this stock to your watchlist.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

NasdaqGM:AERI Income Statement, October 25th 2019

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. You can see what analysts are predicting for Aerie Pharmaceuticals in this interactive graph of future profit estimates.

A Different Perspective

Investors in Aerie Pharmaceuticals had a tough year, with a total loss of 62%, against a market gain of about 13%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3.8% over the last half decade. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Aerie Pharmaceuticals by clicking this link.

Aerie Pharmaceuticals is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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 editorial-team@simplywallst.com. 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.