Strong week for Demae-CanLtd (TSE:2484) shareholders doesn't alleviate pain of three-year loss

Demae-Can Co.,Ltd (TSE:2484) shareholders should be happy to see the share price up 16% in the last month. But that doesn't change the fact that the returns over the last three years have been stomach churning. To wit, the share price sky-dived 80% in that time. Arguably, the recent bounce is to be expected after such a bad drop. Of course the real question is whether the business can sustain a turnaround.

Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.

See our latest analysis for Demae-CanLtd

Because Demae-CanLtd 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. 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 three years, Demae-CanLtd grew revenue at 20% per year. That's a pretty good rate of top-line growth. So it seems unlikely the 22% share price drop (each year) is entirely about the revenue. It could be that the losses were much larger than expected. This is exactly why investors need to diversify - even when a loss making company grows revenue, it can fail to deliver for shareholders.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

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 Demae-CanLtd had a tough year, with a total loss of 12%, against a market gain of about 18%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 11% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. It's always interesting to track share price performance over the longer term. But to understand Demae-CanLtd better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Demae-CanLtd (of which 1 is potentially serious!) you should know about.

Of course Demae-CanLtd 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 Japanese 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.