Strong week for PowerCell Sweden (STO:PCELL) shareholders doesn't alleviate pain of three-year loss

This week we saw the PowerCell Sweden AB (publ) (STO:PCELL) share price climb by 10%. But only the myopic could ignore the astounding decline over three years. The share price has sunk like a leaky ship, down 86% in that time. So it's about time shareholders saw some gains. But the more important question is whether the underlying business can justify a higher price still. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

While the last three years has been tough for PowerCell Sweden shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

See our latest analysis for PowerCell Sweden

PowerCell Sweden 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. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last three years, PowerCell Sweden saw its revenue grow by 35% per year, compound. That's well above most other pre-profit companies. So why has the share priced crashed 23% per year, in the same time? You'd want to take a close look at the balance sheet, as well as the losses. Ultimately, revenue growth doesn't amount to much if the business can't scale well. Unless the balance sheet is strong, the company might have to raise capital.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

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

Investors in PowerCell Sweden had a tough year, with a total loss of 63%, against a market gain of about 17%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% 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. Take risks, for example - PowerCell Sweden has 3 warning signs we think you should be aware of.

Of course PowerCell Sweden 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 Swedish 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com