U.S. Markets closed

Does General Finance's (NASDAQ:GFN) Share Price Gain of 96% Match Its Business Performance?

Simply Wall St

By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. Just take a look at General Finance Corporation (NASDAQ:GFN), which is up 96%, over three years, soundly beating the market return of 40% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 5.3%.

Check out our latest analysis for General Finance

Because General Finance is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

Over the last three years General Finance has grown its revenue at 11% annually. That's a very respectable growth rate. While the share price has done well, compounding at 25% yearly, over three years, that move doesn't seem over the top. Of course, valuation is quite sensitive to the rate of growth. Of course, it's always worth considering funding risks when a company isn't profitable.

You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).

NasdaqGM:GFN Income Statement, April 26th 2019

Balance sheet strength is crucual. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

General Finance provided a TSR of 5.3% over the last twelve months. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 0.7% per year over five year. It is possible that returns will improve along with the business fundamentals. Before spending more time on General Finance it might be wise to click here to see if insiders have been buying or selling shares.

Of course General Finance may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.