Investing in stocks inevitably means buying into some companies that perform poorly. But the long term shareholders of OrthoPediatrics Corp. (NASDAQ:KIDS) have had an unfortunate run in the last three years. Unfortunately, they have held through a 58% decline in the share price in that time. And the share price decline continued over the last week, dropping some 7.6%.

Since OrthoPediatrics has shed US$58m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

OrthoPediatrics 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 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, OrthoPediatrics grew revenue at 22% per year. That's well above most other pre-profit companies. The share price has moved in quite the opposite direction, down 16% over that time, a bad result. It seems likely that the market is worried about the continual losses. When we see revenue growth, paired with a falling share price, we can't help wonder if there is an opportunity for those who are willing to dig deeper.

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 OrthoPediatrics' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

OrthoPediatrics shareholders are down 9.8% for the year, but the market itself is up 33%. 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 4% 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. It's always interesting to track share price performance over the longer term. But to understand OrthoPediatrics better, we need to consider many other factors. For example, we've discovered 3 warning signs for OrthoPediatrics that you should be aware of before investing here.

Of course OrthoPediatrics may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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

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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.