As an investor its worth striving to ensure your overall portfolio beats the market average. But if you try your hand at stock picking, you risk returning less than the market. Unfortunately, that's been the case for longer term FARO Technologies, Inc. (NASDAQ:FARO) shareholders, since the share price is down 49% in the last three years, falling well short of the market return of around 16%. Unfortunately the share price momentum is still quite negative, with prices down 18% in thirty days. However, we note the price may have been impacted by the broader market, which is down 13% in the same time period.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

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FARO Technologies isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally hope to see good revenue growth. 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.

In the last three years, FARO Technologies saw its revenue grow by 1.4% per year, compound. Given it's losing money in pursuit of growth, we are not really impressed with that. Indeed, the stock dropped 14% over the last three years. Shareholders will probably be hoping growth picks up soon. But the real upside for shareholders will be if the company can start generating profits.

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

This free interactive report on FARO Technologies' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's good to see that FARO Technologies has rewarded shareholders with a total shareholder return of 17% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 8% per year over five years. 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. It's always interesting to track share price performance over the longer term. But to understand FARO Technologies better, we need to consider many other factors. For example, we've discovered 1 warning sign for FARO Technologies that you should be aware of before investing here.

Of course FARO Technologies may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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