When you buy shares in a company, there is always a risk that the price drops to zero. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Heron Therapeutics, Inc. (NASDAQ:HRTX) share price had more than doubled in just one year - up 181%. It's also good to see the share price up 11% over the last quarter. On the other hand, longer term shareholders have had a tougher run, with the stock falling 79% in three years.

In light of the stock dropping 9.5% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive one-year return.

Heron Therapeutics 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

Heron Therapeutics grew its revenue by 16% last year. We respect that sort of growth, no doubt. The revenue growth is decent but the share price had an even better year, gaining 181%. If the profitability is on the horizon then now could be a very exciting time to be a shareholder. But investors need to be wary of how the 'fear of missing out' could influence them to buy without doing thorough research.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

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. So it makes a lot of sense to check out what analysts think Heron Therapeutics will earn in the future (free profit forecasts).

A Different Perspective

It's good to see that Heron Therapeutics has rewarded shareholders with a total shareholder return of 181% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 13% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. For example, we've discovered 3 warning signs for Heron Therapeutics (1 is potentially serious!) 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: most of them are flying under the radar).

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com