Yahoo Finance Shareholders in Eton Pharmaceuticals (NASDAQ:ETON) are in the red if they invested three years ago
Eton Pharmaceuticals, Inc. (NASDAQ:ETON) shareholders will doubtless be very grateful to see the share price up 36% in the last quarter. But that doesn't help the fact that the three year return is less impressive. After all, the share price is down 48% in the last three years, significantly under-performing the market.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
See 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. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last three years, Eton Pharmaceuticals saw its revenue grow by 85% per year, compound. That's well above most other pre-profit companies. While its revenue increased, the share price dropped at a rate of 14% per year. That seems like an unlucky result for holders. It seems likely that actual growth fell short of shareholders' expectations. Before considering a purchase, investors should consider how quickly expenses are growing, relative to revenue.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Take a more thorough look at Eton Pharmaceuticals' financial health with this free report on its balance sheet.
A Different Perspective
We can sympathize with Eton Pharmaceuticals about their 6.9% loss for the year, but the silver lining is that the broader market return was worse, at around -8.1%. The one-year return is also not as bad as the 14% per annum loss investors have suffered over the last three years. It could well be that the business has begun to stabilize, though the recent returns are hardly impressive. 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. For example, we've discovered 3 warning signs for Eton Pharmaceuticals that you should be aware of before investing here.
We will like Eton Pharmaceuticals better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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.
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