Even though Neuronetics (NASDAQ:STIM) has lost US$30m market cap in last 7 days, shareholders are still up 130% over 5 years

Neuronetics, Inc. (NASDAQ:STIM) shareholders might be concerned after seeing the share price drop 14% in the last week. But that scarcely detracts from the really solid long term returns generated by the company over five years. In fact, the share price is 130% higher today. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. Of course, that doesn't necessarily mean it's cheap now.

Although Neuronetics has shed US$30m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

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Given that Neuronetics didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

For the last half decade, Neuronetics can boast revenue growth at a rate of 7.2% per year. That's a pretty good long term growth rate. Broadly speaking, this solid progress may well be reflected by the healthy share price gain of 18% per year over five years. Given that the business has made good progress on the top line, it would be worth taking a look at the growth trend. Accelerating growth can be a sign of an inflection point - and could indicate profits lie ahead. Worth watching 100%

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

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. This free report showing analyst forecasts should help you form a view on Neuronetics

A Different Perspective

Neuronetics shareholders are down 17% for the year, but the market itself is up 9.1%. 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 18%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. For instance, we've identified 4 warning signs for Neuronetics (2 shouldn't be ignored) that you should be aware of.

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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.