While not a mind-blowing move, it is good to see that the Domo, Inc. (NASDAQ:DOMO) share price has gained 24% in the last three months. But that doesn't change the fact that the returns over the last three years have been stomach churning. Indeed, the share price is down a whopping 90% in the last three years. So it sure is nice to see a bit of an improvement. Of course the real question is whether the business can sustain a turnaround. While a drop like that is definitely a body blow, money isn't as important as health and happiness.

On a more encouraging note the company has added US$46m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

View our latest analysis for Domo

Domo 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. When a company doesn't make profits, we'd generally hope to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

In the last three years, Domo saw its revenue grow by 10% per year, compound. That's a pretty good rate of top-line growth. So it's hard to believe the share price decline of 24% per year is due to the revenue. More likely, the market was spooked by the cost of that revenue. This is exactly why investors need to diversify - even when a loss making company grows revenue, it can fail to deliver for shareholders.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

If you are thinking of buying or selling Domo stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Domo shareholders are up 2.4% for the year. But that return falls short of the market. But at least that's still a gain! Over five years the TSR has been a reduction of 8% per year, over five years. It could well be that the business is stabilizing. 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. For example, we've discovered 3 warning signs for Domo (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

But note: Domo may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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