Loss-making Metis Energy (SGX:L02) has seen earnings and shareholder returns follow the same downward trajectory over past -63%

Metis Energy Limited (SGX:L02) shareholders should be happy to see the share price up 29% in the last month. But over the last three years we've seen a quite serious decline. Regrettably, the share price slid 63% in that period. Some might say the recent bounce is to be expected after such a bad drop. While many would remain nervous, there could be further gains if the business can put its best foot forward.

Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.

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Metis Energy 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last three years Metis Energy saw its revenue shrink by 33% per year. That means its revenue trend is very weak compared to other loss making companies. With no profits and falling revenue it is no surprise that investors have been dumping the stock, pushing the price down by 18% per year over that time. Bagholders or 'baggies' are people who buy more of a stock as the price collapses. They are then left 'holding the bag' if the shares turn out to be worthless. After losing money on a declining business with falling stock price, we always consider whether eager bagholders are still offering us a reasonable exit price.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

Metis Energy shareholders are down 50% for the year, but the market itself is up 23%. 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 0.9% 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. It's always interesting to track share price performance over the longer term. But to understand Metis Energy better, we need to consider many other factors. Take risks, for example - Metis Energy has 4 warning signs (and 2 which are a bit concerning) we think you should know about.

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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 Singaporean 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.