The simplest way to benefit from a rising market is to buy an index fund. But if you buy individual stocks, you can do both better or worse than that. That downside risk was realized by Atlassian Corporation (NASDAQ:TEAM) shareholders over the last year, as the share price declined 43%. That falls noticeably short of the market return of around 14%. The silver lining (for longer term investors) is that the stock is still 6.0% higher than it was three years ago. The falls have accelerated recently, with the share price down 16% in the last three months.

So let’s have a look and see if the longer term performance of the company has been in line with the underlying business’ progress.

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Atlassian 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 fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Atlassian grew its revenue by 20% over the last year. We think that is pretty nice growth. Unfortunately that wasn’t good enough to stop the share price dropping 43%. You might even wonder if the share price was previously over-hyped. But if revenue keeps growing, then at a certain point the share price would likely follow.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

It’s probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. So we recommend checking out this free report showing consensus forecasts

Atlassian shareholders are down 43% for the year, but the market itself is up 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. 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. 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. Case in point: We’ve spotted 1 warning sign for Atlassian you should be aware of.