Shareholders in Archer Materials (ASX:AXE) are in the red if they invested five years ago

We think intelligent long term investing is the way to go. But that doesn’t mean long term investors can avoid big losses. For example, after five long years the Archer Materials Limited (ASX:AXE) share price is a whole 53% lower. We certainly feel for shareholders who bought near the top. Even worse, it’s down 9.6% in about a month, which isn’t fun at all.

Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they’ve been consistent with returns.

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Archer Materials 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 half decade, Archer Materials saw its revenue increase by 33% per year. That’s better than most loss-making companies. In contrast, the share price is has averaged a loss of 9% per year – that’s quite disappointing. This could mean high expectations have been tempered, potentially because investors are looking to the bottom line. Given the revenue growth we’d consider the stock to be quite an interesting prospect if the company has a clear path to profitability.

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

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.

Archer Materials shareholders gained a total return of 1.4% during the year. Unfortunately this falls short of the market return. But at least that’s still a gain! Over five years the TSR has been a reduction of 9% per year, over five years. It could well be that the business is stabilizing. 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 3 warning signs for Archer Materials (1 doesn’t sit too well with us) that you should be aware of.

But note: Archer Materials 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 Australian 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.