Investors in ArcelorMittal South Africa (JSE:ACL) from three years ago are still down 76%, even after 20% gain this past week

It's nice to see the ArcelorMittal South Africa Limited (JSE:ACL) share price up 20% in a week. But only the myopic could ignore the astounding decline over three years. The share price has sunk like a leaky ship, down 76% in that time. So we're relieved for long term holders to see a bit of uplift. The thing to think about is whether the business has really turned around.

While the last three years has been tough for ArcelorMittal South Africa 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 ArcelorMittal South Africa

Given that ArcelorMittal South Africa didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally hope to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over three years, ArcelorMittal South Africa grew revenue at 13% per year. That's a fairly respectable growth rate. So it's hard to believe the share price decline of 21% per year is due to the revenue. More likely, the market was spooked by the cost of that revenue. If you buy into companies that lose money then you always risk losing money yourself. Just don't lose the lesson.

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

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

A Different Perspective

Investors in ArcelorMittal South Africa had a tough year, with a total loss of 68%, against a market gain of about 13%. 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 9% per year over five years. 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for ArcelorMittal South Africa you should be aware of.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.

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