MTN Zakhele Futhi (RF) (JSE:MTNZF) shareholders are up 10% this past week, but still in the red over the last three years

MTN Zakhele Futhi (RF) Limited (JSE:MTNZF) shareholders should be happy to see the share price up 11% in the last month. But only the myopic could ignore the astounding decline over three years. The share price has sunk like a leaky ship, down 74% in that time. Arguably, the recent bounce is to be expected after such a bad drop. The thing to think about is whether the business has really turned around.

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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MTN Zakhele Futhi (RF) 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. 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, MTN Zakhele Futhi (RF) saw its revenue grow by 53% per year, compound. That's well above most other pre-profit companies. So on the face of it we're really surprised to see the share price down 20% a year in the same time period. 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).

Take a more thorough look at MTN Zakhele Futhi (RF)'s financial health with this free report on its balance sheet.

A Different Perspective

Investors in MTN Zakhele Futhi (RF) had a tough year, with a total loss of 41%, against a market gain of about 24%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% 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. For instance, we've identified 4 warning signs for MTN Zakhele Futhi (RF) (2 are significant) that you should be aware of.

But note: MTN Zakhele Futhi (RF) may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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