It’s nice to see the Unity Biotechnology, Inc. (NASDAQ:UBX) share price up 23% in a week. But that doesn’t change the fact that the returns over the last three years have been stomach churning. The share price has sunk like a leaky ship, down 88% in that time. So it’s about time shareholders saw some gains. The thing to think about is whether the business has really turned around. 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.

Although the past week has been more reassuring for shareholders, they’re still in the red over the last three years, so let’s see if the underlying business has been responsible for the decline.

View our latest analysis for Unity Biotechnology

Unity Biotechnology isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn’t make profits, we’d generally expect to see good revenue growth. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last three years, Unity Biotechnology saw its revenue grow by 171% per year, compound. That is faster than most pre-profit companies. So why has the share priced crashed 24% per year, in the same time? You’d want to take a close look at the balance sheet, as well as the losses. Ultimately, revenue growth doesn’t amount to much if the business can’t scale well. Unless the balance sheet is strong, the company might have to raise capital.

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

earnings-and-revenue-growth
NasdaqGS:UBX Earnings and Revenue Growth March 17th 2022

This free interactive report on Unity Biotechnology’s balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Over the last year, Unity Biotechnology shareholders took a loss of 85%. In contrast the market gained about 1.4%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. The three-year loss of 24% per year isn’t as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. It’s always interesting to track share price performance over the longer term. But to understand Unity Biotechnology better, we need to consider many other factors. For example, we’ve discovered 7 warning signs for Unity Biotechnology (2 are concerning!) that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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.

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