Shareholders in Archer (OB:ARCH) have lost 29%, as stock drops 14% this past week

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 Archer Limited (OB:ARCH) shareholders have had that experience, with the share price dropping 73% in three years, versus a market decline of about 20%. Unfortunately the share price momentum is still quite negative, with prices down 16% in thirty days. Importantly, this could be a market reaction to the recently released financial results. 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 Archer

Archer 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, Archer grew revenue at 11% per year. That's a fairly respectable growth rate. So it's hard to believe the share price decline of 20% per year is due to the revenue. More likely, the market was spooked by the cost of that revenue. If you buy into companies that lose money then you always risk losing money yourself. Just don't lose the lesson.

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 Archer's financial health with this free report on its balance sheet.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Archer's total shareholder return (TSR) and its share price change, which we've covered above. 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. We note that Archer's TSR, at -29% is higher than its share price return of -73%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.

A Different Perspective

Archer shareholders are up 6.1% for the year. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 3% per year over five year. This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand Archer better, we need to consider many other factors. Take risks, for example - Archer has 1 warning sign we think you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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