Even after rising 11% this past week, Lion One Metals (CVE:LIO) shareholders are still down 70% over the past three years

Lion One Metals Limited (CVE:LIO) shareholders should be happy to see the share price up 11% in the last week. But that is meagre solace in the face of the shocking decline over three years. To wit, the share price sky-dived 70% in that time. Arguably, the recent bounce is to be expected after such a bad drop. Of course the real question is whether the business can sustain a turnaround.

On a more encouraging note the company has added CA$7.9m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

See our latest analysis for Lion One Metals

Given that Lion One Metals didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

Over three years, Lion One Metals grew revenue at 166% per year. That is faster than most pre-profit companies. So on the face of it we're really surprised to see the share price down 19% a year in the same time period. You'd want to take a close look at the balance sheet, as well as the losses. Ultimately, revenue growth doesn't amount to much if the business can't scale well. Unless the balance sheet is strong, the company might have to raise capital.

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

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free interactive report on Lion One Metals' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Lion One Metals shareholders are down 65% for the year, but the market itself is up 18%. 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 11% 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's always interesting to track share price performance over the longer term. But to understand Lion One Metals better, we need to consider many other factors. For example, we've discovered 4 warning signs for Lion One Metals (1 is a bit concerning!) that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).

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