Further weakness as Eton Pharmaceuticals (NASDAQ:ETON) drops 10% this week, taking one-year losses to 58%

By
Simply Wall St
Published
January 19, 2022
NasdaqGM:ETON
Source: Shutterstock

The nature of investing is that you win some, and you lose some. Anyone who held Eton Pharmaceuticals, Inc. (NASDAQ:ETON) over the last year knows what a loser feels like. The share price is down a hefty 58% in that time. We note that it has not been easy for shareholders over three years, either; the share price is down 36% in that time. The falls have accelerated recently, with the share price down 29% in the last three months.

After losing 10% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

Check out our latest analysis for Eton Pharmaceuticals

Given that Eton Pharmaceuticals 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. 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 does expect good top-line growth.

In the last year Eton Pharmaceuticals saw its revenue grow by 3,694%. That's well above most other pre-profit companies. In contrast the share price is down 58% over twelve months. Yes, the market can be a fickle mistress. Typically a growth stock like this will be volatile, with some shareholders concerned about the red ink on the bottom line (that is, the losses). Generally speaking investors would consider a stock like this less risky once it turns a profit. But when do you think that will happen?

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

earnings-and-revenue-growth
NasdaqGM:ETON Earnings and Revenue Growth January 19th 2022

If you are thinking of buying or selling Eton Pharmaceuticals stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Eton Pharmaceuticals shareholders are down 58% for the year, but the broader market is up 12%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. The three-year loss of 11% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. 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 2 warning signs for Eton Pharmaceuticals you should be aware of.

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 US exchanges.

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