We're definitely into long term investing, but some companies are simply bad investments over any time frame. It hits us in the gut when we see fellow investors suffer a loss. Spare a thought for those who held Gaussin SA (EPA:ALGAU) for five whole years - as the share price tanked 96%. And it's not just long term holders hurting, because the stock is down 48% in the last year. Shareholders have had an even rougher run lately, with the share price down 37% in the last 90 days. But this could be related to the weak market, which is down 28% in the same period.
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.
Gaussin isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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.
Over half a decade Gaussin reduced its trailing twelve month revenue by 33% for each year. That's definitely a weaker result than most pre-profit companies report. So it's not altogether surprising to see the share price down 48% per year in the same time period. We don't think this is a particularly promising picture. Ironically, that behavior could create an opportunity for the contrarian investor - but only if there are good reasons to predict a brighter future.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
If you are thinking of buying or selling Gaussin stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
While the broader market lost about 20% in the twelve months, Gaussin shareholders did even worse, losing 48%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, longer term shareholders are suffering worse, given the loss of 48% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. 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 7 warning signs for Gaussin (3 make us uncomfortable!) that you should be aware of before investing here.
We will like Gaussin better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on FR exchanges.
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