Eargo, Inc. (NASDAQ:EAR) shareholders will doubtless be very grateful to see the share price up 33% in the last quarter. But that doesn't change the fact that the returns over the last year have been stomach churning. During that time the share price has plummeted like a stone, down 82%. So the rise may not be much consolation. The bigger issue is whether the company can sustain the momentum in the long term. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
With the stock having lost 13% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
Eargo 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 does expect good top-line growth.
Eargo's revenue didn't grow at all in the last year. In fact, it fell 96%. That looks like a train-wreck result to investors far and wide. If you need more proof of that, check the share price. (Hint: it tanked 82%). Our mindset doesn't have a lot of time for stocks like this. While some losers redeem themselves, most remain losers and we prefer winners anyway.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
If you are thinking of buying or selling Eargo stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Eargo shareholders are down 82% for the year, even worse than the market loss of 23%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. Putting aside the last twelve months, it's good to see the share price has rebounded by 33%, in the last ninety days. Let's just hope this isn't the widely-feared 'dead cat bounce' (which would indicate further declines to come). It's always interesting to track share price performance over the longer term. But to understand Eargo better, we need to consider many other factors. Case in point: We've spotted 5 warning signs for Eargo you should be aware of, and 2 of them don't sit too well with us.
If you are like me, then you will not want to miss this free list of growing companies 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 US exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here