Shareholders of Ocular Therapeutix would probably like to forget the past six months even happened. The stock dropped 29.1% and now trades at $8.62. This was partly driven by its softer quarterly results and may have investors wondering how to approach the situation.
Is now the time to buy Ocular Therapeutix, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Do We Think Ocular Therapeutix Will Underperform?
Despite the more favorable entry price, we don't have much confidence in Ocular Therapeutix. Here are three reasons there are better opportunities than OCUL and a stock we'd rather own.
1. Revenue Tumbling Downwards
Long-term growth is the most important, but within healthcare, a stretched historical view may miss new innovations or demand cycles. Ocular Therapeutix’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 5.7% over the last two years. 
2. Shrinking Adjusted Operating Margin
Adjusted operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies because it excludes non-recurring expenses, interest on debt, and taxes.
Analyzing the trend in its profitability, Ocular Therapeutix’s adjusted operating margin decreased significantly over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Ocular Therapeutix’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers. Its adjusted operating margin for the trailing 12 months was negative 520%.
3. Free Cash Flow Margin Dropping
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, Ocular Therapeutix’s margin dropped meaningfully over the last five years. Almost any movement in the wrong direction is undesirable because it is already burning cash. If the trend continues, it could signal it’s in the middle of a big investment cycle. Ocular Therapeutix’s free cash flow margin for the trailing 12 months was negative 417%.
Final Judgment
We see the value of companies making people healthier, but in the case of Ocular Therapeutix, we’re out. Following the recent decline, the stock trades at $8.62 per share (or a forward price-to-sales ratio of 35.1×). The market typically values companies like Ocular Therapeutix based on their anticipated profits for the next 12 months, but it expects the business to lose money. We also think the upside isn’t great compared to the potential downside here - there are more exciting stocks to buy. We’d suggest looking at a top digital advertising platform riding the creator economy.
Stocks We Would Buy Instead of Ocular Therapeutix
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don't just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn't over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
