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Did Changing Sentiment Drive Funding Circle Holdings's (LON:FCH) Share Price Down A Painful 76%?

Simply Wall St

The art and science of stock market investing requires a tolerance for losing money on some of the shares you buy. But it should be a priority to avoid stomach churning catastrophes, wherever possible. So we hope that those who held Funding Circle Holdings plc (LON:FCH) during the last year don't lose the lesson, in addition to the 76% hit to the value of their shares. While some investors are willing to stomach this sort of loss, they are usually professionals who spread their bets thinly. We wouldn't rush to judgement on Funding Circle Holdings because we don't have a long term history to look at. The falls have accelerated recently, with the share price down 15% in the last three months.

Check out our latest analysis for Funding Circle Holdings

Funding Circle Holdings isn't a profitable company, so 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. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last twelve months, Funding Circle Holdings increased its revenue by 37%. We think that is pretty nice growth. However, it seems like the market wanted more, since the share price is down 76%. It could be that the losses are too much for investors to handle without losing their nerve. We'd posit that the future looks challenging, given the disconnect between revenue growth and the share price.

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

LSE:FCH Income Statement, October 21st 2019

Take a more thorough look at Funding Circle Holdings's financial health with this free report on its balance sheet.

A Different Perspective

While Funding Circle Holdings shareholders are down 76% for the year, the market itself is up 8.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The share price decline has continued throughout the most recent three months, down 15%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. If you would like to research Funding Circle Holdings in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

If you are like me, then you will not want to miss this free list of growing companies 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 GB exchanges.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.