Investors push Recce Pharmaceuticals (ASX:RCE) 13% lower this week, company's increasing losses might be to blame

The Recce Pharmaceuticals Ltd (ASX:RCE) share price has had a bad week, falling 13%. On the other hand the returns over the last half decade have not been bad. After all, the stock has performed better than the market (52%) in that time, and is up 54%. Unfortunately not all shareholders will have held it for five years, so spare a thought for those caught in the 51% decline over the last three years: that's a long time to wait for profits.

Since the long term performance has been good but there's been a recent pullback of 13%, let's check if the fundamentals match the share price.

See our latest analysis for Recce Pharmaceuticals

Given that Recce Pharmaceuticals 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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.

For the last half decade, Recce Pharmaceuticals can boast revenue growth at a rate of 44% per year. That's well above most pre-profit companies. While the compound gain of 9% per year is good, it's not unreasonable given the strong revenue growth. If the strong revenue growth continues, we'd hope to see the share price to follow, in time. Opportunity lies where the market hasn't fully priced growth in the underlying business.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

Recce Pharmaceuticals shareholders are up 4.4% for the year. But that was short of the market average. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 9% over five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. It's always interesting to track share price performance over the longer term. But to understand Recce Pharmaceuticals better, we need to consider many other factors. For example, we've discovered 6 warning signs for Recce Pharmaceuticals (2 make us uncomfortable!) that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.