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Dermira, Inc. (NASDAQ:DERM) shareholders will doubtless be very grateful to see the share price up 43% in the last quarter. But that doesn’t change the fact that the returns over the last three years have been disappointing. In that time, the share price dropped 67%. So the improvement may be a real relief to some. After all, could be that the fall was overdone.
Given that Dermira 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. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over three years, Dermira grew revenue at 55% per year. That is faster than most pre-profit companies. In contrast, the share price is down 31% 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).
If you are thinking of buying or selling Dermira stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Dermira shareholders are down 2.5% for the year, but the broader market is up 2.8%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Unfortunately, the longer term story isn’t pretty, with investment losses running at 31% per year over three years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
But note: Dermira may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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 email@example.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.