The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the long term shareholders of Recce Pharmaceuticals Ltd (ASX:RCE) have had an unfortunate run in the last three years. So they might be feeling emotional about the 58% share price collapse, in that time. The falls have accelerated recently, with the share price down 17% in the last three months. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

With the stock having lost 12% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for Recce Pharmaceuticals

Because Recce Pharmaceuticals made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally hope to see good revenue growth. 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.

Over three years, Recce Pharmaceuticals grew revenue at 49% per year. That's well above most other pre-profit companies. In contrast, the share price is down 16% compound, over three years - disappointing by most standards. This could mean hype has come out of the stock because the losses are concerning investors. But a share price drop of that magnitude could well signal that the market is overly negative on the stock.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

This free interactive report on Recce Pharmaceuticals' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Recce Pharmaceuticals shareholders are down 14% for the year, but the market itself is up 9.0%. 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 4% 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. For example, we've discovered 4 warning signs for Recce Pharmaceuticals (2 shouldn't be ignored!) that you should be aware of before investing here.

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 Australian 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.