Investors in Egetis Therapeutics (STO:EGTX) from five years ago are still down 52%, even after 13% gain this past week

Over the last month the Egetis Therapeutics AB (publ) (STO:EGTX) has been much stronger than before, rebounding by 37%. But don't envy holders -- looking back over 5 years the returns have been really bad. In fact, the share price has declined rather badly, down some 57% in that time. So is the recent increase sufficient to restore confidence in the stock? Not yet. But it could be that the fall was overdone.

While the last five years has been tough for Egetis 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.

View our latest analysis for Egetis Therapeutics

Egetis Therapeutics isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last five years Egetis Therapeutics saw its revenue shrink by 18% per year. That puts it in an unattractive cohort, to put it mildly. It seems appropriate, then, that the share price slid about 9% annually during that time. It's fair to say most investors don't like to invest in loss making companies with falling revenue. You'd want to research this company pretty thoroughly before buying, it looks a bit too risky for us.

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

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling Egetis Therapeutics stock, you should check out this free report showing analyst profit forecasts.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Egetis Therapeutics' total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. We note that Egetis Therapeutics' TSR, at -52% is higher than its share price return of -57%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.

A Different Perspective

It's nice to see that Egetis Therapeutics shareholders have received a total shareholder return of 38% over the last year. Notably the five-year annualised TSR loss of 9% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand Egetis Therapeutics better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Egetis Therapeutics (at least 1 which makes us a bit uncomfortable) , and understanding them should be part of your investment process.

Egetis Therapeutics is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.

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