Shareholders in Evolus (NASDAQ:EOLS) are in the red if they invested three years ago
In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term Evolus, Inc. (NASDAQ:EOLS) shareholders have had that experience, with the share price dropping 40% in three years, versus a market return of about 31%. The falls have accelerated recently, with the share price down 30% in the last three months.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Check out our latest analysis for Evolus
Evolus 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last three years, Evolus saw its revenue grow by 52% per year, compound. That is faster than most pre-profit companies. While its revenue increased, the share price dropped at a rate of 12% per year. That seems like an unlucky result for holders. It seems likely that actual growth fell short of shareholders' expectations. Before considering a purchase, investors should consider how quickly expenses are growing, relative to revenue.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free report showing analyst forecasts should help you form a view on Evolus
A Different Perspective
It's nice to see that Evolus shareholders have gained 25% (in total) over the last year. This recent result is much better than the 12% drop suffered by shareholders each year (on average) over the last three. The optimist would say this is evidence that the stock has bottomed, and better days lie ahead. It's always interesting to track share price performance over the longer term. But to understand Evolus better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Evolus , and understanding them should be part of your investment process.
Evolus is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
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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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.
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