9F Inc. (NASDAQ:JFU) shareholders will doubtless be very grateful to see the share price up 52% in the last month. But that is meagre solace in the face of the shocking decline over three years. Indeed, the share price is down a whopping 89% in the last three years. So we're relieved for long term holders to see a bit of uplift. Only time will tell if the company can sustain the turnaround. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
On a more encouraging note the company has added US$10m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.
9F wasn't profitable in the last twelve months, 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last three years 9F saw its revenue shrink by 74% per year. That means its revenue trend is very weak compared to other loss making companies. The swift share price decline at an annual compound rate of 24%, reflects this weak fundamental performance. Never forget that loss making companies with falling revenue can and do cause losses for everyday investors. There is a good reason that investors often describe buying a sharply falling stock price as 'trying to catch a falling knife'. Think about it.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
If you are thinking of buying or selling 9F stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
The last twelve months weren't great for 9F shares, which cost holders 71%, while the market was up about 12%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The three-year loss of 24% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. It's always interesting to track share price performance over the longer term. But to understand 9F better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for 9F (of which 1 makes us a bit uncomfortable!) you should know about.
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 American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.