If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But the last three years have been particularly tough on longer term TrueCar, Inc. (NASDAQ:TRUE) shareholders. Unfortunately, they have held through a 54% decline in the share price in that time. And the ride hasn’t got any smoother in recent times over the last year, with the price 47% lower in that time. Furthermore, it’s down 53% in about a quarter. That’s not much fun for holders.

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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Given that TrueCar didn’t make a profit in the last twelve months, we’ll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That’s because it’s hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

Over the last three years, TrueCar’s revenue dropped 8.2% per year. That is not a good result. The share price decline of 16% compound, over three years, is understandable given the company doesn’t have profits to boast of, and revenue is moving in the wrong direction. Of course, it’s the future that will determine whether today’s price is a good one. We’d be pretty wary of this one until it makes a profit, because we don’t specialize in finding turnaround situations.

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

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

While the broader market gained around 9.5% in the last year, TrueCar shareholders lost 47%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It’s always interesting to track share price performance over the longer term. But to understand TrueCar better, we need to consider many other factors. For instance, we’ve identified 1 warning sign for TrueCar that you should be aware of.