- Oops!Something went wrong.Please try again later.
As every investor would know, you don't hit a homerun every time you swing. But it's not unreasonable to try to avoid truly shocking capital losses. We wouldn't blame GAN Limited (NASDAQ:GAN) shareholders if they were still in shock after the stock dropped like a lead balloon, down 78% in just one year. While some investors are willing to stomach this sort of loss, they are usually professionals who spread their bets thinly. We wouldn't rush to judgement on GAN because we don't have a long term history to look at. Shareholders have had an even rougher run lately, with the share price down 51% in the last 90 days.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
Because GAN 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. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last twelve months, GAN increased its revenue by 180%. That's well above most other pre-profit companies. So the hefty 78% share price crash makes us think the company has somehow offended market participants. There's clearly something unusual going on here such as an acquisition that hasn't delivered expected profits. What is clear is that the market is not judging the company on its revenue growth right now. Of course, investors do over-react when they are stressed out, so the sell-off could be unjustifiably severe.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. If you are thinking of buying or selling GAN stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
Given that the market gained 2.3% in the last year, GAN shareholders might be miffed that they lost 78%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 51% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. 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. For example, we've discovered 2 warning signs for GAN that you should be aware of before investing here.
GAN 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 US exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.