Taking the occasional loss comes part and parcel with investing on the stock market. Unfortunately, shareholders of Grid Dynamics Holdings, Inc. (NASDAQ:GDYN) have suffered share price declines over the last year. In that relatively short period, the share price has plunged 50%. The silver lining (for longer term investors) is that the stock is still 8.0% higher than it was three years ago. Shareholders have had an even rougher run lately, with the share price down 22% in the last 90 days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
Because Grid Dynamics 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last year Grid Dynamics Holdings saw its revenue grow by 31%. We think that is pretty nice growth. Meanwhile, the share price tanked 50%, suggesting the market had much higher expectations. It may well be that the business remains approximately on track, but its revenue growth has simply been delayed. For us it's important to consider when you think a company will become profitable, if you're basing your valuation on revenue.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Over the last year, Grid Dynamics Holdings shareholders took a loss of 50%. In contrast the market gained about 1.0%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Investors are up over three years, booking 2.6% per year, much better than the more recent returns. Sometimes when a good quality long term winner has a weak period, it's turns out to be an opportunity, but you really need to be sure that the quality is there. It's always interesting to track share price performance over the longer term. But to understand Grid Dynamics Holdings better, we need to consider many other factors. Take risks, for example - Grid Dynamics Holdings has 2 warning signs we think you should be aware of.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
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.
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