Strong week for Nufarm (ASX:NUF) shareholders doesn't alleviate pain of three-year loss

Nufarm Limited (ASX:NUF) shareholders should be happy to see the share price up 18% in the last month. But over the last three years we've seen a quite serious decline. In that time, the share price dropped 59%. So it is really good to see an improvement. Perhaps the company has turned over a new leaf.

Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.

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Nufarm 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. 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.

In the last three years Nufarm saw its revenue shrink by 3.0% per year. That is not a good result. With revenue in decline, and profit but a dream, we can understand why the share price has been declining at 17% per year. Having said that, if growth is coming in the future, now may be the low ebb for the company. We'd be pretty wary of this one until it makes a profit, because we don't specialize in finding turnaround situations.

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

We like that insiders have been buying shares in the last twelve months. 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 Nufarm will earn in the future (free profit forecasts).

A Different Perspective

Investors in Nufarm had a tough year, with a total loss of 37%, against a market gain of about 4.9%. 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 6% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

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