Generally speaking long term investing is the way to go. But along the way some stocks are going to perform badly. For example, after five long years the Castle Biosciences, Inc. (NASDAQ:CSTL) share price is a whole 58% lower. That’s not a lot of fun for true believers. We also note that the stock has performed poorly over the last year, with the share price down 24%. Unfortunately the share price momentum is still quite negative, with prices down 21% in thirty days.

So let’s have a look and see if the longer term performance of the company has been in line with the underlying business’ progress.

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Castle Biosciences wasn’t profitable in the last twelve months, it is unlikely we’ll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last half decade, Castle Biosciences saw its revenue increase by 38% per year. That’s well above most other pre-profit companies. Unfortunately for shareholders the share price has dropped 10% per year – disappointing considering the growth. It’s safe to say investor expectations are more grounded now. If you think the company can keep up its revenue growth, you’d have to consider the possibility that there’s an opportunity here.

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

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

Castle Biosciences shareholders are down 24% for the year, but the market itself is up 19%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 10% over the last half decade. 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 Castle Biosciences better, we need to consider many other factors. Like risks, for instance. Every company has them, and we’ve spotted 2 warning signs for Castle Biosciences (of which 1 is potentially serious!) you should know about.