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Archer Materials Limited (ASX:AXE) shareholders might be concerned after seeing the share price drop 26% in the last quarter. But that scarcely detracts from the really solid long term returns generated by the company over five years. Indeed, the share price is up an impressive 255% in that time. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Only time will tell if there is still too much optimism currently reflected in the share price. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 51% decline over the last twelve months.
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
See our latest analysis for Archer Materials
Archer Materials wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. 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.
For the last half decade, Archer Materials can boast revenue growth at a rate of 41% per year. That's well above most pre-profit companies. Meanwhile, its share price performance certainly reflects the strong growth, given the share price grew at 29% per year, compound, during the period. This suggests the market has well and truly recognized the progress the business has made. To our minds that makes Archer Materials worth investigating - it may have its best days ahead.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
While the broader market gained around 11% in the last year, Archer Materials shareholders lost 51%. 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. Longer term investors wouldn't be so upset, since they would have made 29%, each year, over five years. 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 Archer Materials better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Archer Materials (of which 1 is a bit concerning!) you should know about.