Swelling losses haven't held back gains for Establishment Labs Holdings (NASDAQ:ESTA) shareholders since they're up 90% over 5 years

It hasn't been the best quarter for Establishment Labs Holdings Inc. (NASDAQ:ESTA) shareholders, since the share price has fallen 12% in that time. But at least the stock is up over the last five years. However we are not very impressed because the share price is only up 90%, less than the market return of 101%. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 18% drop, in the last year.

Since the long term performance has been good but there's been a recent pullback of 6.0%, let's check if the fundamentals match the share price.

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Establishment Labs Holdings 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

For the last half decade, Establishment Labs Holdings can boast revenue growth at a rate of 14% per year. That's a fairly respectable growth rate. Revenue has been growing at a reasonable clip, so it's debatable whether the share price growth of 14% full reflects the underlying business growth. If revenue growth can maintain for long enough, it's likely profits will flow. Lack of earnings means you have to project further into the future justify the valuation on the basis of future free cash flow.

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. So it makes a lot of sense to check out what analysts think Establishment Labs Holdings will earn in the future (free profit forecasts).

A Different Perspective

Establishment Labs Holdings shareholders are down 18% for the year, but the market itself is up 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 14%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Take risks, for example - Establishment Labs Holdings has 2 warning signs we think you should be aware of.

Of course Establishment Labs Holdings 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.

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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.