While it may not be enough for some shareholders, we think it is good to see the Tucows Inc. (NASDAQ:TCX) share price up 24% in a single quarter. But that is meagre solace in the face of the shocking decline over three years. To wit, the share price sky-dived 70% in that time. Arguably, the recent bounce is to be expected after such a bad drop. But the more important question is whether the underlying business can justify a higher price still.

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.

See our latest analysis for Tucows

Tucows 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.

In the last three years, Tucows saw its revenue grow by 5.6% per year, compound. That's not a very high growth rate considering it doesn't make profits. Nonetheless, it's fair to say the rapidly declining share price (down 19%, compound, over three years) suggests the market is very disappointed with this level of growth. We generally don't try to 'catch the falling knife'. Of course, revenue growth is nice but generally speaking the lower the profits, the riskier the business - and this business isn't making steady profits.

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

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

Tucows shareholders gained a total return of 8.8% during the year. But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 9% per year, over five years. It could well be that the business is stabilizing. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 4 warning signs for Tucows (3 can't be ignored) that you should be aware of.