As an investor, mistakes are inevitable. But really bad investments should be rare. So spare a thought for the long term shareholders of Bicycle Therapeutics plc (NASDAQ:BCYC); the share price is down a whopping 72% in the last three years. That would be a disturbing experience. And more recent buyers are having a tough time too, with a drop of 21% in the last year. The falls have accelerated recently, with the share price down 37% in the last three months.

While the stock has risen 5.4% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

Bicycle Therapeutics 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. 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.

In the last three years, Bicycle Therapeutics saw its revenue grow by 45% per year, compound. That is faster than most pre-profit companies. So on the face of it we're really surprised to see the share price down 20% a year in the same time period. You'd want to take a close look at the balance sheet, as well as the losses. Sometimes fast revenue growth doesn't lead to profits. If the company is low on cash, it may have to raise capital soon.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Bicycle Therapeutics is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

Bicycle Therapeutics shareholders are down 21% for the year, but the market itself is up 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. On the bright side, long term shareholders have made money, with a gain of 6% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Case in point: We've spotted 3 warning signs for Bicycle Therapeutics you should be aware of, and 1 of them is concerning.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.