Shareholders in Lion One Metals (CVE:LIO) have lost 58%, as stock drops 10% this past week

Lion One Metals Limited (CVE:LIO) shareholders should be happy to see the share price up 11% in the last quarter. But that doesn't change the fact that the returns over the last three years have been disappointing. Regrettably, the share price slid 58% in that period. So the improvement may be a real relief to some. The rise has some hopeful, but turnarounds are often precarious.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

View our latest analysis for Lion One Metals

Because Lion One Metals made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally hope to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last three years, Lion One Metals saw its revenue grow by 166% per year, compound. That is faster than most pre-profit companies. The share price has moved in quite the opposite direction, down 16% over that time, a bad result. It seems likely that the market is worried about the continual losses. But a share price drop of that magnitude could well signal that the market is overly negative on the stock.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

Lion One Metals shareholders are down 24% for the year, but the market itself is up 16%. 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 5% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Lion One Metals has 5 warning signs (and 2 which can't be ignored) we think you should know about.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.