FingerMotion (NASDAQ:FNGR) pulls back 12% this week, but still delivers shareholders favorable 19% CAGR over 3 years

FingerMotion, Inc. (NASDAQ:FNGR) shareholders might understandably be very concerned that the share price has dropped 43% in the last quarter. On the other hand the share price is higher than it was three years ago. However, it's unlikely many shareholders are elated with the share price gain of 69% over that time, given the rising market.

While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

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Because FingerMotion made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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 the last three years FingerMotion has grown its revenue at 9.4% annually. That's a very respectable growth rate. While the share price has done well, compounding at 19% yearly, over three years, that move doesn't seem over the top. Of course, valuation is quite sensitive to the rate of growth. Of course, it's always worth considering funding risks when a company isn't profitable.

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of FingerMotion's earnings, revenue and cash flow.

A Different Perspective

Investors in FingerMotion had a tough year, with a total loss of 32%, 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 9% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for FingerMotion (of which 2 are a bit concerning!) 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 American 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.