In order to justify the effort of selecting individual stocks, it’s worth striving to beat the returns from a market index fund. But even the best stock picker will only win with some selections. So we wouldn’t blame long term Avon Technologies Plc (LON:AVON) shareholders for doubting their decision to hold, with the stock down 51% over a half decade. Shareholders have had an even rougher run lately, with the share price down 11% in the last 90 days.

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.

Our free stock report includes 1 warning sign investors should be aware of before investing in Avon Technologies. Read for free now.

We don’t think that Avon Technologies’ modest trailing twelve month profit has the market’s full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last half decade, Avon Technologies saw its revenue increase by 8.1% per year. That’s a fairly respectable growth rate. The share price, meanwhile, has fallen 9% compounded, over five years. It seems probably that the business has failed to live up to initial expectations. That could lead to an opportunity if the company is going to become profitable sooner rather than later.

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

We know that Avon Technologies has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Avon Technologies’ balance sheet strength is a great place to start, if you want to investigate the stock further.

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Avon Technologies’ TSR for the last 5 years was -45%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

We’re pleased to report that Avon Technologies shareholders have received a total shareholder return of 14% over one year. That’s including the dividend. Notably the five-year annualised TSR loss of 8% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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. Take risks, for example – Avon Technologies has 1 warning sign we think you should be aware of.