Investors in Marisa Lojas (BVMF:AMAR3) from three years ago are still down 88%, even after 11% gain this past week

It is doubtless a positive to see that the Marisa Lojas S.A. (BVMF:AMAR3) share price has gained some 33% in the last three months. But the last three years have seen a terrible decline. In that time the share price has melted like a snowball in the desert, down 89%. So it sure is nice to see a bit of an improvement. Only time will tell if the company can sustain the turnaround. While a drop like that is definitely a body blow, money isn't as important as health and happiness.

While the last three years has been tough for Marisa Lojas shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

See our latest analysis for Marisa Lojas

Marisa Lojas 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 fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last three years, Marisa Lojas saw its revenue grow by 6.3% per year, compound. Given it's losing money in pursuit of growth, we are not really impressed with that. Nonetheless, it's fair to say the rapidly declining share price (down 24%, compound, over three years) suggests the market is very disappointed with this level of growth. While we're definitely wary of the stock, after that kind of performance, it could be an over-reaction. Of course, revenue growth is nice but generally speaking the lower the profits, the riskier the business - and this business isn't making steady profits.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

This free interactive report on Marisa Lojas' 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 27% in the last year, Marisa Lojas shareholders lost 38%. 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 13% per year over five years. 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's always interesting to track share price performance over the longer term. But to understand Marisa Lojas better, we need to consider many other factors. For instance, we've identified 3 warning signs for Marisa Lojas (2 are a bit concerning) 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 Brazilian 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.