Shareholders in RS2 (MTSE:RS2) have lost 86%, as stock drops 17% this past week

We're definitely into long term investing, but some companies are simply bad investments over any time frame. It hits us in the gut when we see fellow investors suffer a loss. Anyone who held RS2 p.l.c. (MTSE:RS2) for five years would be nursing their metaphorical wounds since the share price dropped 86% in that time. We also note that the stock has performed poorly over the last year, with the share price down 48%. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

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RS2 isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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 half decade, RS2 saw its revenue increase by 6.7% per year. That's a fairly respectable growth rate. So it is unexpected to see the stock down 13% per year in the last five years. The truth is that the growth might be below expectations, and investors are probably worried about the continual losses.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

If you are thinking of buying or selling RS2 stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Investors in RS2 had a tough year, with a total loss of 48%, against a market gain of about 7.0%. 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, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 13% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand RS2 better, we need to consider many other factors. For example, we've discovered 2 warning signs for RS2 (1 can't be ignored!) that you should be aware of before investing here.

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