GFA (TSE:8783) adds JP¥3.6b to market cap in the past 7 days, though investors from five years ago are still down 65%

It is doubtless a positive to see that the GFA Co., Ltd. (TSE:8783) share price has gained some 172% in the last three months. But that is little comfort to those holding over the last half decade, sitting on a big loss. In that time the share price has delivered a rude shock to holders, who find themselves down 65% after a long stretch. Some might say the recent bounce is to be expected after such a bad drop. Of course, this could be the start of a turnaround.

On a more encouraging note the company has added JP¥3.6b to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

See our latest analysis for GFA

GFA 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 half decade, GFA saw its revenue increase by 15% per year. That's a pretty good rate for a long time period. The share price, meanwhile, has fallen 11% compounded, over five years. It seems probably that the business has failed to live up to initial expectations. That could lead to an opportunity if the company is going to become profitable sooner rather than later.

You can see below how earnings and revenue have changed over time (discover 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

It's good to see that GFA has rewarded shareholders with a total shareholder return of 62% in the last twelve months. That certainly beats the loss of about 11% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. Like risks, for instance. Every company has them, and we've spotted 5 warning signs for GFA (of which 4 shouldn't be ignored!) you should know about.

But note: GFA 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 Japanese 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.