Investors push Datasection (TSE:3905) 12% lower this week, company's increasing losses might be to blame

Datasection Inc. (TSE:3905) shareholders might be concerned after seeing the share price drop 15% in the last month. But that isn't a problem when you consider how the share price has soared over the last year. In that time, shareholders have had the pleasure of a 388% boost to the share price. Arguably, the recent fall is to be expected after such a strong rise. Only time will tell if there is still too much optimism currently reflected in the share price.

Since the long term performance has been good but there's been a recent pullback of 12%, let's check if the fundamentals match the share price.

See our latest analysis for Datasection

Because Datasection 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Datasection grew its revenue by 16% last year. We respect that sort of growth, no doubt. But the market is even more excited about it, with the price apparently bound for the moon, up 388% in one of earth's orbits. While we are always careful about jumping on a hot stock too late, there's certainly good reason to keep an eye on Datasection.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

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

A Different Perspective

It's good to see that Datasection has rewarded shareholders with a total shareholder return of 388% in the last twelve months. That's better than the annualised return of 22% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. For instance, we've identified 3 warning signs for Datasection (2 are a bit concerning) that you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com