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Imagine Owning Gfinity (LON:GFIN) And Taking A 95% Loss Square On The Chin

Long term investing is the way to go, but that doesn't mean you should hold every stock forever. It hits us in the gut when we see fellow investors suffer a loss. Imagine if you held Gfinity plc (LON:GFIN) for half a decade as the share price tanked 95%. And some of the more recent buyers are probably worried, too, with the stock falling 72% in the last year. The falls have accelerated recently, with the share price down 63% in the last three months. But this could be related to the weak market, which is down 29% in the same period.

While a drop like that is definitely a body blow, money isn't as important as health and happiness.

View our latest analysis for Gfinity

Given that Gfinity 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. 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 five years, Gfinity grew its revenue at 48% per year. That's better than most loss-making companies. So it's not at all clear to us why the share price sunk 46% throughout that time. It could be that the stock was over-hyped before. While there might be an opportunity here, you'd want to take a close look at the balance sheet strength.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

AIM:GFIN Income Statement April 3rd 2020
AIM:GFIN Income Statement April 3rd 2020

This free interactive report on Gfinity's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

We regret to report that Gfinity shareholders are down 72% for the year. Unfortunately, that's worse than the broader market decline of 21%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 46% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Case in point: We've spotted 6 warning signs for Gfinity you should be aware of, and 3 of them don't sit too well with us.

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.