Many investors define successful investing as beating the market average over the long term. But if you try your hand at stock picking, your risk returning less than the market. We regret to report that long term Gresham Technologies plc (LON:GHT) shareholders have had that experience, with the share price dropping 45% in three years, versus a market decline of about 4.3%. Shareholders have had an even rougher run lately, with the share price down 15% in the last 90 days.
Given that Gresham Technologies didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over three years, Gresham Technologies grew revenue at 8.8% per year. That's a fairly respectable growth rate. Shareholders have seen the share price fall at 13% per year, for three years. So the market has definitely lost some love for the stock. With revenue growing at a solid clip, now might be the time to focus on the possibility that it will have 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 Gresham Technologies stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Although it hurts that Gresham Technologies returned a loss of 4.1% in the last twelve months, the broader market was actually worse, returning a loss of 10%. Longer term investors wouldn't be so upset, since they would have made 0.5%, each year, over five years. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. 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 Gresham Technologies (1 makes us a bit uncomfortable!) that you should be aware of before investing here.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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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