DocMorris (VTX:DOCM) shareholders are up 23% this past week, but still in the red over the last three years

DocMorris AG (VTX:DOCM) shareholders should be happy to see the share price up 23% in the last week. But only the myopic could ignore the astounding decline over three years. The share price has sunk like a leaky ship, down 88% in that time. Arguably, the recent bounce is to be expected after such a bad drop. The thing to think about is whether the business has really turned around. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

The recent uptick of 23% could be a positive sign of things to come, so let's take a look at historical fundamentals.

Check out our latest analysis for DocMorris

DocMorris 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 hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over the last three years, DocMorris' revenue dropped 24% per year. That's definitely a weaker result than most pre-profit companies report. And as you might expect the share price has been weak too, dropping at a rate of 23% per year. 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 image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

DocMorris is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

DocMorris shareholders are down 72% for the year, but the market itself is up 8.8%. 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 13% 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. For example, we've discovered 2 warning signs for DocMorris (1 can't be ignored!) that you should be aware of before investing here.

Of course DocMorris may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.