eREXLtd (TSE:9517) adds JP¥5.6b to market cap in the past 7 days, though investors from three years ago are still down 66%

eREX Co.,Ltd. (TSE:9517) shareholders should be happy to see the share price up 12% in the last week. But that doesn't change the fact that the returns over the last three years have been disappointing. Indeed, the share price is down a tragic 67% in the last three years. So the improvement may be a real relief to some. Perhaps the company has turned over a new leaf.

While the last three years has been tough for eREXLtd shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

See our latest analysis for eREXLtd

eREXLtd isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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, eREXLtd grew revenue at 2.2% per year. That's not a very high growth rate considering it doesn't make profits. This uninspiring revenue growth has no doubt helped send the share price lower; it dropped 19% during the period. It can be well worth keeping an eye on growth stocks that disappoint the market, because sometimes they re-accelerate. After all, growing a business isn't easy, and the process will not always be smooth.

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

Take a more thorough look at eREXLtd's financial health with this free report on its balance sheet.

A Different Perspective

While the broader market gained around 17% in the last year, eREXLtd shareholders lost 15%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, longer term shareholders are suffering worse, given the loss of 10% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. 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. To that end, you should be aware of the 2 warning signs we've spotted with eREXLtd .

If you are like me, then you will not want to miss this free list of undervalued small caps 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 Japanese 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.