Investors who have held Pharma Mar (BME:PHM) over the last three years have watched its earnings decline along with their investment

Pharma Mar, S.A. (BME:PHM) shareholders should be happy to see the share price up 10% in the last week. Meanwhile over the last three years the stock has dropped hard. Tragically, the share price declined 70% in that time. So it's good to see it climbing back up. After all, could be that the fall was overdone.

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

Check out our latest analysis for Pharma Mar

We don't think that Pharma Mar's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.

Over the last three years, Pharma Mar's revenue dropped 12% per year. That is not a good result. The share price decline of 19% compound, over three years, is understandable given the company doesn't have profits to boast of, and revenue is moving in the wrong direction. Of course, it's the future that will determine whether today's price is a good one. We'd be pretty wary of this one until it makes a profit, because we don't specialize in finding turnaround situations.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

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

A Different Perspective

Investors in Pharma Mar had a tough year, with a total loss of 22% (including dividends), against a market gain of about 21%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 3% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Pharma Mar better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Pharma Mar (of which 1 is a bit unpleasant!) you should know about.

Of course Pharma Mar 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 Spanish exchanges.

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

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.