Genetic Signatures (ASX:GSS) investors are sitting on a loss of 75% if they invested three years ago

Every investor on earth makes bad calls sometimes. But really bad investments should be rare. So take a moment to sympathize with the long term shareholders of Genetic Signatures Limited (ASX:GSS), who have seen the share price tank a massive 75% over a three year period. That'd be enough to cause even the strongest minds some disquiet. And over the last year the share price fell 53%, so we doubt many shareholders are delighted. Furthermore, it's down 30% in about a quarter. That's not much fun for holders.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for Genetic Signatures

Genetic Signatures 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 fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last three years, Genetic Signatures saw its revenue grow by 29% per year, compound. That is faster than most pre-profit companies. So why has the share priced crashed 20% per year, in the same time? You'd want to take a close look at the balance sheet, as well as the losses. Sometimes fast revenue growth doesn't lead to profits. Unless the balance sheet is strong, the company might have to raise capital.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

If you are thinking of buying or selling Genetic Signatures stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Genetic Signatures shareholders are down 53% for the year, but the market itself is up 2.9%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 8% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Even so, be aware that Genetic Signatures is showing 2 warning signs in our investment analysis , you should know about...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian 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.