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If you love investing in stocks you're bound to buy some losers. Long term 3P Learning Limited (ASX:3PL) shareholders know that all too well, since the share price is down considerably over three years. So they might be feeling emotional about the 55% share price collapse, in that time. The more recent news is of little comfort, with the share price down 47% in a year. Shareholders have had an even rougher run lately, with the share price down 17% in the last 90 days.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
3P Learning 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.
Over three years, 3P Learning grew revenue at 8.2% per year. That's a pretty good rate of top-line growth. That contrasts with the weak share price, which has fallen 16% compounded, over three years. To be frank we're surprised to see revenue growth and share price growth diverge so strongly. It would be well worth taking a closer look at the company, to determine growth trends (and balance sheet strength).
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Take a more thorough look at 3P Learning's financial health with this free report on its balance sheet.
A Different Perspective
3P Learning shareholders are down 47% for the year, but the market itself is up 8.8%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 3% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand 3P Learning better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with 3P Learning .