Even after rising 16% this past week, LEMON (KOSDAQ:294140) shareholders are still down 86% over the past five years

LEMON Co., Ltd. (KOSDAQ:294140) shareholders will doubtless be very grateful to see the share price up 33% in the last quarter. But that doesn't change the fact that the returns over the last half decade have been stomach churning. In fact, the share price has tumbled down a mountain to land 87% lower after that period. The recent bounce might mean the long decline is over, but we are not confident. The million dollar question is whether the company can justify a long term recovery. While a drop like that is definitely a body blow, money isn't as important as health and happiness.

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

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LEMON 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. When a company doesn't make profits, we'd generally hope to see good 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.

In the last five years LEMON saw its revenue shrink by 37% per year. That puts it in an unattractive cohort, to put it mildly. So it's not that strange that the share price dropped 13% per year in that period. We don't think this is a particularly promising picture. Of course, the poor performance could mean the market has been too severe selling down. That can happen.

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

It's nice to see that LEMON shareholders have received a total shareholder return of 37% over the last year. That certainly beats the loss of about 13% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. Even so, be aware that LEMON is showing 3 warning signs in our investment analysis , and 2 of those are a bit unpleasant...

We will like LEMON better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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