It's nice to see the EyePoint Pharmaceuticals, Inc. (NASDAQ:EYPT) share price up 15% in a week. But that's not enough to compensate for the decline over the last twelve months. Like a receding glacier in a warming world, the share price has melted 60% in that period. It's not that amazing to see a bounce after a drop like that. Arguably, the fall was overdone.

The recent uptick of 15% could be a positive sign of things to come, so let's take a look at historical fundamentals.

EyePoint 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. 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.

EyePoint Pharmaceuticals grew its revenue by 7.5% over the last year. That's not a very high growth rate considering it doesn't make profits. Without profits, and with revenue growth sluggish, you get a 60% loss for shareholders, over the year. We'd want to see evidence that future revenue growth will be stronger before getting too interested. When a stock falls hard like this, it can signal an over-reaction. Our preference is to wait for a fundamental improvements before buying, but now could be a good time for some research.

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

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. You can see what analysts are predicting for EyePoint Pharmaceuticals in this interactive graph of future profit estimates.

A Different Perspective

Investors in EyePoint Pharmaceuticals had a tough year, with a total loss of 60%, against a market gain of about 28%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Take risks, for example - EyePoint Pharmaceuticals has 3 warning signs we think you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).

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.