The last three months have been tough on Core Lithium Ltd (ASX:CXO) shareholders, who have seen the share price decline a rather worrying 44%. But that doesn't change the fact that shareholders have received really good returns over the last five years. In fact, the share price is 229% higher today. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Only time will tell if there is still too much optimism currently reflected in the share price. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 87% drop, in the last year.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for Core Lithium

Core Lithium 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. 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.

For the last half decade, Core Lithium can boast revenue growth at a rate of 101% per year. That's well above most pre-profit companies. Meanwhile, its share price performance certainly reflects the strong growth, given the share price grew at 27% per year, compound, during the period. So it seems likely that buyers have paid attention to the strong revenue growth. Core Lithium seems like a high growth stock - so growth investors might want to add it to their watchlist.

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

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.

A Different Perspective

Core Lithium shareholders are down 87% for the year, but the market itself is up 13%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 27%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Even so, be aware that Core Lithium is showing 2 warning signs in our investment analysis , and 1 of those is a bit unpleasant...

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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

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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.