Investors are selling off Pharmaniaga Berhad (KLSE:PHARMA), lack of profits no doubt contribute to shareholders three-year loss

If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. Long term Pharmaniaga Berhad (KLSE:PHARMA) shareholders know that all too well, since the share price is down considerably over three years. Unfortunately, they have held through a 69% decline in the share price in that time. And over the last year the share price fell 36%, so we doubt many shareholders are delighted. The falls have accelerated recently, with the share price down 22% in the last three months. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.

After losing 14% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

View our latest analysis for Pharmaniaga Berhad

Pharmaniaga Berhad 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over three years, Pharmaniaga Berhad grew revenue at 5.3% per year. Given it's losing money in pursuit of growth, we are not really impressed with that. It's likely this weak growth has contributed to an annualised return of 19% for the last three years. It can be well worth keeping an eye on growth stocks that disappoint the market, because sometimes they re-accelerate. Keep in mind it isn't unusual for good businesses to have a tough time or a couple of uninspiring years.

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

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

What About The Total Shareholder Return (TSR)?

We've already covered Pharmaniaga Berhad's share price action, but we should also mention its total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Pharmaniaga Berhad's TSR of was a loss of 64% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

Investors in Pharmaniaga Berhad had a tough year, with a total loss of 36%, against a market gain of about 5.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5% per year over five years. 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. 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 learn about the 2 warning signs we've spotted with Pharmaniaga Berhad (including 1 which is significant) .

Of course Pharmaniaga Berhad 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 Malaysian 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.