Investors in Basic-Fit (AMS:BFIT) have unfortunately lost 15% over the last three years

Many investors define successful investing as beating the market average over the long term. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Basic-Fit N.V. (AMS:BFIT) shareholders have had that experience, with the share price dropping 15% in three years, versus a market return of about 72%.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

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Basic-Fit 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.

Over three years, Basic-Fit grew revenue at 21% per year. That is faster than most pre-profit companies. While its revenue increased, the share price dropped at a rate of 5% per year. That seems like an unlucky result for holders. It seems likely that actual growth fell short of shareholders' expectations. Still, with high hopes now tempered, now might prove to be an opportunity to buy.

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

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling Basic-Fit stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

Basic-Fit shareholders are up 0.9% for the year. But that was short of the market average. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 1.5% over five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. 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. For example, we've discovered 1 warning sign for Basic-Fit 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 Dutch 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.