Paion (ETR:PA8) shareholders are up 23% this past week, but still in the red over the last five years

Paion AG (ETR:PA8) shareholders will doubtless be very grateful to see the share price up 79% in the last quarter. But that can't change the reality that over the longer term (five years), the returns have been really quite dismal. Indeed, the share price is down 66% in the period. So we're not so sure if the recent bounce should be celebrated. We'd err towards caution given the long term under-performance.

Although the past week has been more reassuring for shareholders, they're still in the red over the last five years, so let's see if the underlying business has been responsible for the decline.

View our latest analysis for Paion

Because Paion 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

Over five years, Paion grew its revenue at 36% per year. That's better than most loss-making companies. Unfortunately for shareholders the share price has dropped 11% per year - disappointing considering the growth. It's safe to say investor expectations are more grounded now. Given the revenue growth we'd consider the stock to be quite an interesting prospect if the company has a clear path to profitability.

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

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

A Different Perspective

While the broader market lost about 11% in the twelve months, Paion shareholders did even worse, losing 44%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 11% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Paion better, we need to consider many other factors. Take risks, for example - Paion has 3 warning signs (and 1 which is potentially serious) we think you should know about.

Of course Paion 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 German 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.