SI-BONE (NASDAQ:SIBN) adds US$88m to market cap in the past 7 days, though investors from three years ago are still down 28%

While not a mind-blowing move, it is good to see that the SI-BONE, Inc. (NASDAQ:SIBN) share price has gained 24% in the last three months. But that doesn't help the fact that the three year return is less impressive. Truth be told the share price declined 28% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

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.

See our latest analysis for SI-BONE

SI-BONE 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

Over three years, SI-BONE grew revenue at 21% per year. That's well above most other pre-profit companies. While its revenue increased, the share price dropped at a rate of 9% per year. That seems like an unlucky result for holders. It seems likely that actual growth fell short of shareholders' expectations. Before considering a purchase, investors should consider how quickly expenses are growing, relative to revenue.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

SI-BONE shareholders are down 15% for the year, but the market itself is up 23%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 3 warning signs for SI-BONE you should be aware of.

Of course SI-BONE 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.