Northern Data (FRA:NB2) adds €458m to market cap in the past 7 days, though investors from three years ago are still down 70%

It's nice to see the Northern Data AG (FRA:NB2) share price up 15% in a week. But over the last three years we've seen a quite serious decline. Indeed, the share price is down a tragic 70% in the last three years. So it's good to see it climbing back up. While many would remain nervous, there could be further gains if the business can put its best foot forward.

On a more encouraging note the company has added €458m 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.

Check out our latest analysis for Northern Data

Given that Northern Data 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. Shareholders of unprofitable companies usually desire strong 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.

Over three years, Northern Data grew revenue at 16% per year. That's a pretty good rate of top-line growth. That contrasts with the weak share price, which has fallen 19% compounded, over three years. To be frank we're surprised to see revenue growth and share price growth diverge so strongly. So this is one stock that might be worth investigating further, or even adding to your watchlist.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

Northern Data shareholders are down 19% for the year, but the market itself is up 6.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 6% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Northern Data , and understanding them should be part of your investment process.

But note: Northern Data may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

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