Many investors define successful investing as beating the market average over the long term. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Gladstone Commercial Corporation (NASDAQ:GOOD) shareholders have had that experience, with the share price dropping 36% in three years, versus a market return of about 14%.

While the last three years has been tough for Gladstone Commercial shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

Because Gladstone Commercial made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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.

Over three years, Gladstone Commercial grew revenue at 3.3% per year. That's not a very high growth rate considering it doesn't make profits. The stock dropped 11% during that time. If revenue growth accelerates, we might see the share price bounce. But the real upside for shareholders will be if the company can start generating profits.

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

Take a more thorough look at Gladstone Commercial's financial health with this free report on its balance sheet.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Gladstone Commercial's TSR for the last 3 years was -17%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Gladstone Commercial shareholders gained a total return of 16% during the year. But that return falls short of the market. But at least that's still a gain! Over five years the TSR has been a reduction of 0.3% per year, over five years. It could well be that the business is stabilizing. 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 2 warning signs for Gladstone Commercial you should be aware of.

Of course Gladstone Commercial 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.