While shareholders of Arovella Therapeutics (ASX:ALA) are in the black over 1 year, those who bought a week ago aren't so fortunate

The Arovella Therapeutics Limited (ASX:ALA) share price has had a bad week, falling 11%. Despite this, the stock is a strong performer over the last year, no doubt about that. Indeed, the share price is up an impressive 160% in that time. So some might not be surprised to see the price retrace some. The real question is whether the business is trending in the right direction.

While the stock has fallen 11% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

Check out 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. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over the last twelve months, Arovella Therapeutics' revenue grew by 16%. That's a fairly respectable growth rate. While that revenue growth is pretty good the share price performance outshone it, with a lift of 160% as mentioned above. If the profitability is on the horizon then now could be a very exciting time to be a shareholder. Of course, we are always cautious about succumbing to 'fear of missing out' when a stock has shot up strongly.

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

It's nice to see that Arovella Therapeutics shareholders have received a total shareholder return of 160% over the last year. That gain is better than the annual TSR over five years, which is 8%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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 5 warning signs with Arovella Therapeutics (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com