Eton Pharmaceuticals' (NASDAQ:ETON) growing losses don't faze investors as the stock spikes 16% this past week

When you buy shares in a company, there is always a risk that the price drops to zero. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Eton Pharmaceuticals, Inc. (NASDAQ:ETON) share price has soared 171% return in just a single year. Also pleasing for shareholders was the 158% gain in the last three months. It is also impressive that the stock is up 90% over three years, adding to the sense that it is a real winner.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

Check out our latest analysis for Eton Pharmaceuticals

Because Eton Pharmaceuticals made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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 the last twelve months, Eton Pharmaceuticals' revenue grew by 8.1%. That's not great considering the company is losing money. So we wouldn't have expected the share price to rise by 171%. The business will need a lot more growth to justify that increase. We're not so sure that revenue growth is driving the market optimism about the stock.

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

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

It's nice to see that Eton Pharmaceuticals shareholders have received a total shareholder return of 171% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 12% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.

Of course Eton Pharmaceuticals 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.