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Did Changing Sentiment Drive Good Times Restaurants's (NASDAQ:GTIM) Share Price Down A Worrying 55%?

Simply Wall St

Even the best stock pickers will make plenty of bad investments. Unfortunately, shareholders of Good Times Restaurants Inc. (NASDAQ:GTIM) have suffered share price declines over the last year. To wit the share price is down 55% in that time. Even if you look out three years, the returns are still disappointing, with the share price down (the share price is down 53%) in that time. Furthermore, it's down 15% in about a quarter. That's not much fun for holders.

See our latest analysis for Good Times Restaurants

Because Good Times Restaurants is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Good Times Restaurants grew its revenue by 16% over the last year. We think that is pretty nice growth. Unfortunately it seems investors wanted more, because the share price is down 55% in that time. It may well be that the business remains approximately on track, but its revenue growth has simply been delayed. To our minds it isn't enough to just look at revenue, anyway. Always consider when profits will flow.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

NasdaqCM:GTIM Income Statement, July 24th 2019

Take a more thorough look at Good Times Restaurants's financial health with this free report on its balance sheet.

A Different Perspective

While the broader market gained around 5.5% in the last year, Good Times Restaurants shareholders lost 55%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 12% per year over five years. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. Before spending more time on Good Times Restaurants it might be wise to click here to see if insiders have been buying or selling shares.

But note: Good Times Restaurants may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.