While Botanix Pharmaceuticals Limited (ASX:BOT) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 13% in the last quarter. But that doesn't displace its brilliant performance over three years. Indeed, the share price is up a whopping 443% in that time. So you might argue that the recent reduction in the share price is unremarkable in light of the longer term performance. The only way to form a view of whether the current price is justified is to consider the merits of the business itself.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for Botanix Pharmaceuticals

Given that Botanix 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. 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.

In the last 3 years Botanix Pharmaceuticals saw its revenue shrink by 24% per year. This is in stark contrast to the strong share price growth of 76%, compound, per year. This clear lack of correlation between revenue and share price is surprising to see in a money losing company. At the risk of upsetting holders, this does suggest that hope for a better future is playing a significant role in the share price action.

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

If you are thinking of buying or selling Botanix Pharmaceuticals stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

It's good to see that Botanix Pharmaceuticals has rewarded shareholders with a total shareholder return of 103% in the last twelve months. That's better than the annualised return of 23% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Botanix Pharmaceuticals better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with Botanix Pharmaceuticals .

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.