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Arovella Therapeutics Limited (ASX:ALA) shareholders might be rather concerned because the share price has dropped 49% in the last month. But in stark contrast, the returns over the last half decade have impressed. We think most investors would be happy with the 156% return, over that period. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Only time will tell if there is still too much optimism currently reflected in the share price.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
View our latest analysis for Arovella Therapeutics
Because Arovella Therapeutics 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. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
For the last half decade, Arovella Therapeutics can boast revenue growth at a rate of 27% per year. Even measured against other revenue-focussed companies, that's a good result. So it's not entirely surprising that the share price reflected this performance by increasing at a rate of 21% per year, in that time. So it seems likely that buyers have paid attention to the strong revenue growth. Arovella Therapeutics seems like a high growth stock - so growth investors might want to add it to their watchlist.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What About The Total Shareholder Return (TSR)?
We've already covered Arovella Therapeutics' share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Arovella Therapeutics hasn't been paying dividends, but its TSR of 203% exceeds its share price return of 156%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
Investors in Arovella Therapeutics had a tough year, with a total loss of 35%, against a market gain of about 3.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 25%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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 5 warning signs for Arovella Therapeutics you should be aware of.