Restoque Comércio e Confecções de Roupas'(BVMF:LLIS3) Share Price Is Down 84% Over The Past Three Years.

Restoque Comércio e Confecções de Roupas S.A. (BVMF:LLIS3) shareholders should be happy to see the share price up 13% in the last month. But that doesn't change the fact that the returns over the last three years have been stomach churning. In that time the share price has melted like a snowball in the desert, down 84%. So it sure is nice to see a bit of an improvement. But the more important question is whether the underlying business can justify a higher price still.

While a drop like that is definitely a body blow, money isn't as important as health and happiness.

View our latest analysis for Restoque Comércio e Confecções de Roupas

Restoque Comércio e Confecções de Roupas 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 expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

Over the last three years, Restoque Comércio e Confecções de Roupas' revenue dropped 19% per year. That's definitely a weaker result than most pre-profit companies report. The swift share price decline at an annual compound rate of 23%, reflects this weak fundamental performance. Never forget that loss making companies with falling revenue can and do cause losses for everyday investors. There is a good reason that investors often describe buying a sharply falling stock price as 'trying to catch a falling knife'. Think about it.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

This free interactive report on Restoque Comércio e Confecções de Roupas' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market gained around 5.4% in the last year, Restoque Comércio e Confecções de Roupas shareholders lost 69% (even including dividends). 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. 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. 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. For instance, we've identified 3 warning signs for Restoque Comércio e Confecções de Roupas that you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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

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This article by Simply Wall St is general in nature. 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.
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