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Did You Manage To Avoid Geospace Technologies' (NASDAQ:GEOS) Devastating 70% Share Price Drop?

Some stocks are best avoided. We really hate to see fellow investors lose their hard-earned money. For example, we sympathize with anyone who was caught holding Geospace Technologies Corporation (NASDAQ:GEOS) during the five years that saw its share price drop a whopping 70%. And some of the more recent buyers are probably worried, too, with the stock falling 61% in the last year. Furthermore, it's down 54% in about a quarter. That's not much fun for holders.

See our latest analysis for Geospace Technologies

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Geospace Technologies became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics may better explain the share price move.

Arguably, the revenue drop of 3.6% a year for half a decade suggests that the company can't grow in the long term. This has probably encouraged some shareholders to sell down the stock.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

NasdaqGS:GEOS Income Statement May 6th 2020
NasdaqGS:GEOS Income Statement May 6th 2020

If you are thinking of buying or selling Geospace Technologies stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While the broader market lost about 0.5% in the twelve months, Geospace Technologies shareholders did even worse, losing 61%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 21% per year over five years. We realise that Baron Rothschild 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 business. 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 example, we've discovered 3 warning signs for Geospace Technologies (1 doesn't sit too well with us!) that you should be aware of before investing here.

But note: Geospace Technologies 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.

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.

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