Further weakness as GDS Holdings (NASDAQ:GDS) drops 3.2% this week, taking three-year losses to 90%
GDS Holdings Limited (NASDAQ:GDS) shareholders should be happy to see the share price up 18% in the last month. But that doesn't change the fact that the returns over the last three years have been stomach churning. To wit, the share price sky-dived 90% in that time. So it sure is nice to see a bit of an improvement. But the more important question is whether the underlying business can justify a higher price still. 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.
After losing 3.2% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
Check out our latest analysis for GDS Holdings
Because GDS Holdings made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over three years, GDS Holdings grew revenue at 20% per year. That's a pretty good rate of top-line growth. So it seems unlikely the 24% share price drop (each year) is entirely about the revenue. More likely, the market was spooked by the cost of that revenue. This is exactly why investors need to diversify - even when a loss making company grows revenue, it can fail to deliver for shareholders.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
GDS Holdings is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling GDS Holdings stock, you should check out this free report showing analyst consensus estimates for future profits.
A Different Perspective
While the broader market gained around 34% in the last year, GDS Holdings shareholders lost 53%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 12% over the last half decade. 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. 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. Case in point: We've spotted 2 warning signs for GDS Holdings you should be aware of.
Of course GDS Holdings 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 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.
