City of London Group (LON:CIN) adds UK£13m to market cap in the past 7 days, though investors from three years ago are still down 49%

This month, we saw the City of London Group plc (LON:CIN) up an impressive 39%. But that cannot eclipse the less-than-impressive returns over the last three years. In fact, the share price is down 50% in the last three years, falling well short of the market return.

While the stock has risen 25% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

Check out our latest analysis for City of London Group

Because City of London Group 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. Shareholders of unprofitable companies usually expect strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last three years City of London Group saw its revenue shrink by 68% per year. That's definitely a weaker result than most pre-profit companies report. On the face of it we'd posit the share price fall of 14% compound, over three years is well justified by the fundamental deterioration. The key question now is whether the company has the capacity to fund itself to profitability, without more cash. The company will need to return to revenue growth as quickly as possible, if it wants to see some enthusiasm from investors.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. If you are thinking of buying or selling City of London Group stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

The last twelve months weren't great for City of London Group shares, which cost holders 15%, while the market was up about 13%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. However, the loss over the last year isn't as bad as the 14% per annum loss investors have suffered over the last three years. We'd need clear signs of growth in the underlying business before we could muster much enthusiasm for this one. 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. Take risks, for example - City of London Group has 6 warning signs (and 2 which are concerning) we think you should know about.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

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