EDAP TMS (NASDAQ:EDAP) dips 26% this week as increasing losses might not be inspiring confidence among its investors

Even the best stock pickers will make plenty of bad investments. Anyone who held EDAP TMS S.A. (NASDAQ:EDAP) over the last year knows what a loser feels like. The share price has slid 61% in that time. We note that it has not been easy for shareholders over three years, either; the share price is down 47% in that time. Furthermore, it's down 47% in about a quarter. That's not much fun for holders.

With the stock having lost 26% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for EDAP TMS

EDAP TMS wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last twelve months, EDAP TMS increased its revenue by 6.4%. That's not a very high growth rate considering it doesn't make profits. It's likely this muted growth has contributed to the share price decline of 61% in the last year. Like many holders, we really want to see better revenue growth in companies that lose money. When a stock falls hard like this, it can signal an over-reaction. Our preference is to wait for a fundamental improvements before buying, but now could be a good time for some research.

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

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

While the broader market gained around 27% in the last year, EDAP TMS shareholders lost 61%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 0.3% over the last half decade. 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with EDAP TMS , and understanding them should be part of your investment process.

Of course EDAP TMS 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 American 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.