Investors in DroneShield (ASX:DRO) have unfortunately lost 15% over the last five years

Ideally, your overall portfolio should beat the market average. But even the best stock picker will only win with some selections. At this point some shareholders may be questioning their investment in DroneShield Limited (ASX:DRO), since the last five years saw the share price fall 15%. And the share price decline continued over the last week, dropping some 5.6%.

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 DroneShield

DroneShield 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.

Over five years, DroneShield grew its revenue at 63% per year. That's well above most other pre-profit companies. The share price drop of 3% per year over five years would be considered let down. So you might argue the DroneShield should get more credit for its rather impressive revenue growth over the period. If that's the case, now might be the smart time to take a close look at it.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Take a more thorough look at DroneShield's financial health with this free report on its balance sheet.

A Different Perspective

DroneShield shareholders are down 8.1% for the year, but the market itself is up 25%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% over the last half decade. 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 DroneShield better, we need to consider many other factors. Even so, be aware that DroneShield is showing 4 warning signs in our investment analysis , and 1 of those is significant...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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

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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