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Strong week for Netlinkz (ASX:NET) shareholders doesn't alleviate pain of three-year loss

Netlinkz Limited (ASX:NET) shareholders will doubtless be very grateful to see the share price up 47% in the last month. But the last three years have seen a terrible decline. In that time the share price has melted like a snowball in the desert, down 86%. 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. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

The recent uptick of 39% could be a positive sign of things to come, so let's take a lot at historical fundamentals.

Check out our latest analysis for Netlinkz

Netlinkz isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over three years, Netlinkz grew revenue at 64% per year. That's well above most other pre-profit companies. So on the face of it we're really surprised to see the share price down 23% a year in the same time period. 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).

earnings-and-revenue-growth
earnings-and-revenue-growth

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

A Different Perspective

While it's certainly disappointing to see that Netlinkz shares lost 3.8% throughout the year, that wasn't as bad as the market loss of 4.3%. Longer term investors wouldn't be so upset, since they would have made 1.4%, each year, over five years. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. It's always interesting to track share price performance over the longer term. But to understand Netlinkz better, we need to consider many other factors. Even so, be aware that Netlinkz is showing 4 warning signs in our investment analysis , and 2 of those can't be ignored...

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.

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

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.

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