Percheron Therapeutics (ASX:PER) adds AU$15m to market cap in the past 7 days, though investors from three years ago are still down 50%

Investing in stocks inevitably means buying into some companies that perform poorly. But long term Percheron Therapeutics Limited (ASX:PER) shareholders have had a particularly rough ride in the last three year. Regrettably, they have had to cope with a 50% drop in the share price over that period.

While the last three years has been tough for Percheron Therapeutics shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

Check out our latest analysis for Percheron Therapeutics

Because Percheron Therapeutics 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. When a company doesn't make profits, we'd generally hope to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over three years, Percheron Therapeutics grew revenue at 44% per year. That's well above most other pre-profit companies. In contrast, the share price is down 15% 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 image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

This free interactive report on Percheron Therapeutics' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

We're pleased to report that Percheron Therapeutics shareholders have received a total shareholder return of 47% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 4% per year), it would seem that the stock's performance has improved in recent times. 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. Take risks, for example - Percheron Therapeutics has 4 warning signs (and 1 which is significant) we think you should know about.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.