Strong week for Aeffe (BIT:AEF) shareholders doesn't alleviate pain of three-year loss

Aeffe S.p.A. (BIT:AEF) shareholders should be happy to see the share price up 13% in the last week. Meanwhile over the last three years the stock has dropped hard. Regrettably, the share price slid 61% in that period. 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 €8.9m 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 Aeffe

Given that Aeffe 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. 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.

Over the last three years, Aeffe's revenue dropped 1.2% per year. That's not what investors generally want to see. The share price decline of 17% compound, over three years, is understandable given the company doesn't have profits to boast of, and revenue is moving in the wrong direction. Having said that, if growth is coming in the future, now may be the low ebb for the company. We don't generally like to own companies that lose money and can't grow revenues. But any company is worth looking at when it makes a maiden profit.

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

This free interactive report on Aeffe's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Aeffe shareholders are down 10% for the year, but the market itself is up 25%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 8% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand Aeffe better, we need to consider many other factors. For instance, we've identified 3 warning signs for Aeffe that you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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