It's not possible to invest over long periods without making some bad investments. But you want to avoid the really big losses like the plague. So take a moment to sympathize with the long term shareholders of Northern Data AG (FRA:NB2), who have seen the share price tank a massive 73% over a three year period. That would be a disturbing experience. And the ride hasn't got any smoother in recent times over the last year, with the price 28% lower in that time. But it's up 8.2% in the last week. Less than a week ago Northern Data announced its financial results; you can catch up on the most recent data by reading our company report.

It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.

See our latest analysis for Northern Data

Northern Data isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last three years, Northern Data saw its revenue grow by 23% per year, compound. That is faster than most pre-profit companies. So why has the share priced crashed 20% per year, in the same time? The share price makes us wonder if there is an issue with profitability. Sometimes fast revenue growth doesn't lead to profits. Unless the balance sheet is strong, the company might have to raise capital.

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

Investors in Northern Data had a tough year, with a total loss of 28%, against a market gain of about 7.1%. 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. On the bright side, long term shareholders have made money, with a gain of 4% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Northern Data better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Northern Data .