The past three years for Eton Pharmaceuticals (NASDAQ:ETON) investors has not been profitable
As an investor its worth striving to ensure your overall portfolio beats the market average. But if you try your hand at stock picking, your risk returning less than the market. We regret to report that long term Eton Pharmaceuticals, Inc. (NASDAQ:ETON) shareholders have had that experience, with the share price dropping 46% in three years, versus a market return of about 40%. Unfortunately the share price momentum is still quite negative, with prices down 18% in thirty 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.
Check out our latest analysis for Eton Pharmaceuticals
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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last three years, Eton Pharmaceuticals saw its revenue grow by 68% per year, compound. That's well above most other pre-profit companies. The share price drop of 13% per year over three years would be considered disappointing by many, so you might argue the company is getting little credit for its impressive revenue growth. It's possible that the prior share price assumed unrealistically high future growth. Still, with high hopes now tempered, now might prove to be an opportunity to buy.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Eton Pharmaceuticals produced a TSR of 6.5% over the last year. While you don't go broke making a profit, this return was actually lower than the average market return of about 17%. On the bright side, that's certainly better than the yearly loss of about 13% endured over the last three years, implying that the company is doing better recently. We hope the turnaround in fortunes continues. 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. Even so, be aware that Eton Pharmaceuticals is showing 2 warning signs in our investment analysis , you should know about...
Of course Eton Pharmaceuticals 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 American 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.
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