Shareholders in Onward Medical (EBR:ONWD) have lost 46%, as stock drops 11% this past week

It's easy to match the overall market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. For example, the Onward Medical N.V. (EBR:ONWD) share price is down 46% in the last year. That contrasts poorly with the market decline of 5.8%. Onward Medical hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. Furthermore, it's down 28% in about a quarter. That's not much fun for holders.

With the stock having lost 11% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

See our latest analysis for Onward Medical

Because Onward Medical 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. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last twelve months, Onward Medical increased its revenue by 51%. That's well above most other pre-profit companies. Given the revenue growth, the share price drop of 46% seems quite harsh. Our sympathies to shareholders who are now underwater. Prima facie, revenue growth like that should be a good thing, so it's worth checking whether losses have stabilized. Our brains have evolved to think in linear fashion, so there's value in learning to recognize exponential growth. We are, in some ways, simply the wisest of the monkeys.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Take a more thorough look at Onward Medical's financial health with this free report on its balance sheet.

A Different Perspective

Onward Medical shareholders are down 46% for the year, even worse than the market loss of 5.8%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. With the stock down 28% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. 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. For example, we've discovered 4 warning signs for Onward Medical (2 shouldn't be ignored!) that you should be aware of before investing here.

Of course Onward Medical may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Belgian 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.