Investing in stocks inevitably means buying into some companies that perform poorly. But the long term shareholders of Aequus Pharmaceuticals Inc. (CVE:AQS) have had an unfortunate run in the last three years. So they might be feeling emotional about the 56% share price collapse, in that time. And more recent buyers are having a tough time too, with a drop of 22% in the last year. Shareholders have had an even rougher run lately, with the share price down 22% in the last 90 days.
Aequus Pharmaceuticals isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. 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 three years, Aequus Pharmaceuticals saw its revenue grow by 36% per year, compound. That's well above most other pre-profit companies. The share price has moved in quite the opposite direction, down 24% over that time, a bad result. It seems likely that the market is worried about the continual losses. When we see revenue growth, paired with a falling share price, we can't help wonder if there is an opportunity for those who are willing to dig deeper.
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
The last twelve months weren't great for Aequus Pharmaceuticals shares, which cost holders 22%, while the market was up about 8.3%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 24% per annum loss investors have suffered over the last three years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. Before spending more time on Aequus Pharmaceuticals it might be wise to click here to see if insiders have been buying or selling shares.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
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