Arovella Therapeutics (ASX:ALA) delivers shareholders strong 58% CAGR over 3 years, surging 19% in the last week alone

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But in contrast you can make much more than 100% if the company does well. For instance the Arovella Therapeutics Limited (ASX:ALA) share price is 294% higher than it was three years ago. How nice for those who held the stock! In more good news, the share price has risen 28% in thirty days.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

View our latest analysis for Arovella Therapeutics

Given that Arovella Therapeutics 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 desire strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

Over the last three years Arovella Therapeutics has grown its revenue at 40% annually. That's well above most pre-profit companies. Meanwhile, the share price performance has been pretty solid at 58% compound over three years. This suggests the market has recognized the progress the business has made, at least to a significant degree. That's not to say we think the share price is too high. In fact, it might be worth keeping an eye on this one.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Take a more thorough look at Arovella Therapeutics' financial health with this free report on its balance sheet.

A Different Perspective

It's nice to see that Arovella Therapeutics shareholders have received a total shareholder return of 143% over the last year. That gain is better than the annual TSR over five years, which is 17%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Arovella Therapeutics (at least 1 which is significant) , and understanding them should be part of your investment process.

For those who like to find winning investments this free list of undervalued 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 Australian 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.