Shareholders in Frontier Digital Ventures (ASX:FDV) are in the red if they invested three years ago

It's not possible to invest over long periods without making some bad investments. But you have a problem if you face massive losses more than once in a while. So take a moment to sympathize with the long term shareholders of Frontier Digital Ventures Limited (ASX:FDV), who have seen the share price tank a massive 72% over a three year period. That would certainly shake our confidence in the decision to own the stock. And the ride hasn't got any smoother in recent times over the last year, with the price 51% lower in that time. Furthermore, it's down 20% in about a quarter. That's not much fun for holders.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

View our latest analysis for Frontier Digital Ventures

Because Frontier Digital Ventures made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

In the last three years, Frontier Digital Ventures saw its revenue grow by 40% per year, compound. That's well above most other pre-profit companies. So why has the share priced crashed 20% per year, in the same time? You'd want to take a close look at the balance sheet, as well as the losses. Ultimately, revenue growth doesn't amount to much if the business can't scale well. If the company is low on cash, it may have to raise capital soon.

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

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

A Different Perspective

Frontier Digital Ventures shareholders are down 51% for the year, but the market itself is up 3.1%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Frontier Digital Ventures better, we need to consider many other factors. Take risks, for example - Frontier Digital Ventures has 2 warning signs we think you should be aware of.

We will like Frontier Digital Ventures better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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

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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.