VNET Group, Inc. (NASDAQ:VNET) shareholders will doubtless be very grateful to see the share price up 96% in the last quarter. But that doesn't change the fact that the returns over the last three years have been stomach churning. To wit, the share price sky-dived 79% in that time. So it sure is nice to see a bit of an improvement. The thing to think about is whether the business has really turned around.

On a more encouraging note the company has added US$59m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

Because VNET Group 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. Shareholders of unprofitable companies usually desire strong 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, VNET Group saw its revenue grow by 10.0% per year, compound. That's a pretty good rate of top-line growth. So it's hard to believe the share price decline of 22% per year is due to the revenue. It could be that the losses were much larger than expected. This is exactly why investors need to diversify - even when a loss making company grows revenue, it can fail to deliver for shareholders.

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 VNET Group's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

VNET Group shareholders are down 1.9% for the year, but the market itself is up 39%. 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. Unfortunately, longer term shareholders are suffering worse, given the loss of 9% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. 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. For instance, we've identified 3 warning signs for VNET Group (1 makes us a bit uncomfortable) that you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.