As every investor would know, not every swing hits the sweet spot. But you want to avoid the really big losses like the plague. So consider, for a moment, the misfortune of AtriCure, Inc. (NASDAQ:ATRC) investors who have held the stock for three years as it declined a whopping 73%. That would certainly shake our confidence in the decision to own the stock. And the ride hasn't got any smoother in recent times over the last year, with the price 57% lower in that time. Shareholders have had an even rougher run lately, with the share price down 37% in the last 90 days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

With the stock having lost 9.8% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

AtriCure isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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.

In the last three years, AtriCure saw its revenue grow by 20% per year, compound. That's well above most other pre-profit companies. So on the face of it we're really surprised to see the share price down 20% a year in the same time period. 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. If the company is low on cash, it may have to raise capital soon.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Take a more thorough look at AtriCure's financial health with this free report on its balance sheet.

A Different Perspective

While the broader market gained around 26% in the last year, AtriCure shareholders lost 57%. 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 5% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - AtriCure has 2 warning signs we think you should be aware of.

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 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.