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The past three years for Nearmap (ASX:NEA) investors has not been profitable

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·3 min read
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Nearmap Ltd (ASX:NEA) shareholders should be happy to see the share price up 15% in the last month. But over the last three years we've seen a quite serious decline. In that time, the share price dropped 62%. Some might say the recent bounce is to be expected after such a bad drop. After all, could be that the fall was overdone.

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.

View our latest analysis for Nearmap

Nearmap 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 expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last three years, Nearmap saw its revenue grow by 20% per year, compound. That's well above most other pre-profit companies. The share price has moved in quite the opposite direction, down 17% over that time, a bad result. This could mean hype has come out of the stock because the losses are concerning investors. When we see revenue growth, paired with a falling share price, we can't help wonder if there is an opportunity for those who are willing to dig deeper.

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

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

This free interactive report on Nearmap's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market lost about 6.4% in the twelve months, Nearmap shareholders did even worse, losing 45%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 9%, 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. 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. Take risks, for example - Nearmap has 2 warning signs we think you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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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