Shareholders in Fermentalg (EPA:FALG) have lost 57%, as stock drops 10% this past week

We think intelligent long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. Zooming in on an example, the Fermentalg SA (EPA:FALG) share price dropped 57% in the last half decade. That's an unpleasant experience for long term holders. And some of the more recent buyers are probably worried, too, with the stock falling 45% in the last year. The falls have accelerated recently, with the share price down 13% in the last three months.

Since Fermentalg has shed €6.1m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for Fermentalg

Because Fermentalg 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last half decade, Fermentalg saw its revenue increase by 32% per year. That's well above most other pre-profit companies. Unfortunately for shareholders the share price has dropped 9% per year - disappointing considering the growth. This could mean high expectations have been tempered, potentially because investors are looking to the bottom line. If you think the company can keep up its revenue growth, you'd have to consider the possibility that there's an opportunity here.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

Fermentalg shareholders are down 45% for the year, but the market itself is up 8.4%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 9% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Fermentalg you should know about.

But note: Fermentalg may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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