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Did Changing Sentiment Drive General Finance's (NASDAQ:GFN) Share Price Down By 33%?

Simply Wall St
·3 mins read

Investors can approximate the average market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Unfortunately the General Finance Corporation (NASDAQ:GFN) share price slid 33% over twelve months. That's disappointing when you consider the market declined 5.2%. The silver lining (for longer term investors) is that the stock is still 22% higher than it was three years ago. In the last ninety days we've seen the share price slide 43%. But this could be related to the weak market, which is down 18% in the same period.

Check out our latest analysis for General Finance

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

General Finance managed to increase earnings per share from a loss to a profit, over the last 12 months.

We're surprised that the share price is lower given that improvement. If the company can sustain the earnings growth, this might be an inflection point for the business, which would make right now a really interesting time to study it more closely.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

NasdaqGM:GFN Past and Future Earnings April 23rd 2020
NasdaqGM:GFN Past and Future Earnings April 23rd 2020

We know that General Finance has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

A Different Perspective

We regret to report that General Finance shareholders are down 33% for the year. Unfortunately, that's worse than the broader market decline of 5.2%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4.3% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 4 warning signs for General Finance you should be aware of, and 1 of them shouldn't be ignored.

For those who like to find winning investments this free list of growing 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 US exchanges.

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.

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. Thank you for reading.