Ideally, your overall portfolio should beat the market average. But the main game is to find enough winners to more than offset the losers So we wouldn't blame long term Avadel Pharmaceuticals plc (NASDAQ:AVDL) shareholders for doubting their decision to hold, with the stock down 34% over a half decade. Furthermore, it's down 18% in about a quarter. That's not much fun for holders.

Check out our latest analysis for Avadel Pharmaceuticals

Given that Avadel Pharmaceuticals didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. 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.

In the last five years Avadel Pharmaceuticals saw its revenue shrink by 32% per year. That's definitely a weaker result than most pre-profit companies report. It seems pretty reasonable to us that the share price dipped 6% per year in that time. This loss means the stock shareholders are probably pretty annoyed. Risk averse investors probably wouldn't like this one much.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. You can see what analysts are predicting for Avadel Pharmaceuticals in this interactive graph of future profit estimates.

A Different Perspective

Investors in Avadel Pharmaceuticals had a tough year, with a total loss of 8.8%, against a market gain of about 49%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6% per year over five years. 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. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Avadel Pharmaceuticals , and understanding them should be part of your investment process.