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Investing in stocks inevitably means buying into some companies that perform poorly. But the last three years have been particularly tough on longer term Gfinity plc (LON:GFIN) shareholders. Sadly for them, the share price is down 68% in that time. The good news is that the stock is up 3.7% in the last week.
Gfinity isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Over three years, Gfinity grew revenue at 2.8% per year. Given it's losing money in pursuit of growth, we are not really impressed with that. It's likely this weak growth has contributed to an annualised return of 19% for the last three years. When a stock falls hard like this, some investors like to add the company to a watchlist (in case the business recovers, longer term). Keep in mind it isn't unusual for good businesses to have a tough time or a couple of uninspiring years.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
It's good to see that Gfinity has rewarded shareholders with a total shareholder return of 27% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 11% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 5 warning signs for Gfinity (of which 1 shouldn't be ignored!) you should know about.
Gfinity is not the only stock that insiders are buying. 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 GB exchanges.
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. 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.
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