Strong week for GFA (TSE:8783) shareholders doesn't alleviate pain of three-year loss

It's nice to see the GFA Co., Ltd. (TSE:8783) share price up 16% in a week. But that doesn't change the fact that the returns over the last three years have been disappointing. Tragically, the share price declined 64% in that time. So it is really good to see an improvement. Perhaps the company has turned over a new leaf.

The recent uptick of 16% could be a positive sign of things to come, so let's take a look at historical fundamentals.

We've discovered 4 warning signs about GFA. View them for free.

Given that GFA 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 fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last three years, GFA saw its revenue grow by 39% per year, compound. That's well above most other pre-profit companies. In contrast, the share price is down 18% compound, over three years - disappointing by most standards. This could mean hype has come out of the stock because the losses are concerning investors. But a share price drop of that magnitude could well signal that the market is overly negative on the stock.

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

Take a more thorough look at GFA's financial health with this free report on its balance sheet.

A Different Perspective

While the broader market gained around 4.3% in the last year, GFA shareholders lost 15%. 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. However, the loss over the last year isn't as bad as the 9% per annum loss investors have suffered over the last half decade. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. It's always interesting to track share price performance over the longer term. But to understand GFA better, we need to consider many other factors. For instance, we've identified 4 warning signs for GFA (3 can't be ignored) that you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.