Shareholders in Duro Felguera (BME:MDF) have lost 69%, as stock drops 12% this past week

If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But long term Duro Felguera, S.A. (BME:MDF) shareholders have had a particularly rough ride in the last three year. Regrettably, they have had to cope with a 69% drop in the share price over that period. The more recent news is of little comfort, with the share price down 66% in a year. On top of that, the share price is down 12% in the last week.

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

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Duro Felguera wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last three years, Duro Felguera saw its revenue grow by 30% per year, compound. That is faster than most pre-profit companies. In contrast, the share price is down 19% compound, over three years - disappointing by most standards. It seems likely that the market is worried about the continual losses. When we see revenue growth, paired with a falling share price, we can't help wonder if there is an opportunity for those who are willing to dig deeper.

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

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

Investors in Duro Felguera had a tough year, with a total loss of 66%, against a market gain of about 36%. 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 9% 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. 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. Case in point: We've spotted 4 warning signs for Duro Felguera you should be aware of, and 3 of them are a bit unpleasant.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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