Strong week for Vireo Growth (CSE:VREO) shareholders doesn't alleviate pain of three-year loss

It's nice to see the Vireo Growth Inc. (CSE:VREO) share price up 16% in a week. But the last three years have seen a terrible decline. The share price has sunk like a leaky ship, down 72% in that time. So it sure is nice to see a bit of an improvement. Of course the real question is whether the business can sustain a turnaround.

On a more encouraging note the company has added CA$29m 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.

Our free stock report includes 2 warning signs investors should be aware of before investing in Vireo Growth. Read for free now.

Given that Vireo Growth 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. When a company doesn't make profits, we'd generally hope to see good revenue growth. 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.

In the last three years, Vireo Growth saw its revenue grow by 20% per year, compound. That's a fairly respectable growth rate. So it seems unlikely the 20% share price drop (each year) is entirely about the revenue. More likely, the market was spooked by the cost of that revenue. This is exactly why investors need to diversify - even when a loss making company grows revenue, it can fail to deliver for shareholders.

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

Take a more thorough look at Vireo Growth's financial health with this free report on its balance sheet.

A Different Perspective

While the broader market gained around 16% in the last year, Vireo Growth shareholders lost 11%. 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 1.2% 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. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Vireo Growth , and understanding them should be part of your investment process.

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 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.