EyePoint Pharmaceuticals (NASDAQ:EYPT shareholders incur further losses as stock declines 20% this week, taking five-year losses to 54%

By
Simply Wall St
Published
May 10, 2022
NasdaqGM:EYPT
Source: Shutterstock

Statistically speaking, long term investing is a profitable endeavour. But that doesn't mean long term investors can avoid big losses. For example the EyePoint Pharmaceuticals, Inc. (NASDAQ:EYPT) share price dropped 54% over five years. We certainly feel for shareholders who bought near the top. The last week also saw the share price slip down another 20%. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.

Since EyePoint Pharmaceuticals has shed US$83m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for EyePoint Pharmaceuticals

EyePoint Pharmaceuticals 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. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over five years, EyePoint Pharmaceuticals grew its revenue at 45% per year. That's well above most other pre-profit companies. In contrast, the share price is has averaged a loss of 9% per year - that's quite disappointing. This could mean high expectations have been tempered, potentially because investors are looking to the bottom line. If you think the company can keep up its revenue growth, you'd have to consider the possibility that there's an opportunity here.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
NasdaqGM:EYPT Earnings and Revenue Growth May 10th 2022

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

It's good to see that EyePoint Pharmaceuticals has rewarded shareholders with a total shareholder return of 7.8% in the last twelve months. Notably the five-year annualised TSR loss of 9% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with EyePoint Pharmaceuticals , and understanding them should be part of your investment process.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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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