Bilibili Inc. (NASDAQ:BILI) shareholders will doubtless be very grateful to see the share price up 45% in the last quarter. But the last three years have seen a terrible decline. To wit, the share price sky-dived 85% in that time. So it's about time shareholders saw some gains. But the more important question is whether the underlying business can justify a higher price still. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

On a more encouraging note the company has added US$252m 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.

Bilibili 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. 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.

Over three years, Bilibili grew revenue at 14% per year. That's a pretty good rate of top-line growth. So it seems unlikely the 23% share price drop (each year) is entirely about the revenue. More likely, the market was spooked by the cost of that revenue. 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).

Bilibili is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

Bilibili provided a TSR of 7.7% over the last twelve months. Unfortunately this falls short of the market return. But at least that's still a gain! Over five years the TSR has been a reduction of 0.4% per year, over five years. It could well be that the business is stabilizing. It's always interesting to track share price performance over the longer term. But to understand Bilibili better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Bilibili you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.

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