Even after rising 16% this past week, ArcelorMittal South Africa (JSE:ACL) shareholders are still down 78% over the past three years

It's nice to see the ArcelorMittal South Africa Limited (JSE:ACL) share price up 16% in a week. But only the myopic could ignore the astounding decline over three years. In that time the share price has melted like a snowball in the desert, down 78%. Arguably, the recent bounce is to be expected after such a bad drop. But the more important question is whether the underlying business can justify a higher price still.

On a more encouraging note the company has added R212m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

See our latest analysis for ArcelorMittal South Africa

ArcelorMittal South Africa isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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, ArcelorMittal South Africa saw its revenue grow by 4.7% per year, compound. Given it's losing money in pursuit of growth, we are not really impressed with that. But the share price crash at 21% per year does seem a bit harsh! While we're definitely wary of the stock, after that kind of performance, it could be an over-reaction. Before considering a purchase, take a look at the losses the company is racking up.

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

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

ArcelorMittal South Africa shareholders are down 6.2% for the year, but the market itself is up 29%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 6% per annum loss investors have suffered over the last half decade. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. It's always interesting to track share price performance over the longer term. But to understand ArcelorMittal South Africa better, we need to consider many other factors. Take risks, for example - ArcelorMittal South Africa has 1 warning sign we think you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.