It's not possible to invest over long periods without making some bad investments. But really big losses can really drag down an overall portfolio. So consider, for a moment, the misfortune of Tiga Gaming Inc (GTSM:6536) investors who have held the stock for three years as it declined a whopping 78%. That would certainly shake our confidence in the decision to own the stock. And over the last year the share price fell 56%, so we doubt many shareholders are delighted. Furthermore, it's down 42% in about a quarter. That's not much fun for holders.
Because Tiga Gaming 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over three years, Tiga Gaming grew revenue at 2.1% per year. That's not a very high growth rate considering it doesn't make profits. But the share price crash at 39% per year does seem a bit harsh! While we're definitely wary of the stock, after that kind of performance, it could be an over-reaction. Of course, revenue growth is nice but generally speaking the lower the profits, the riskier the business - and this business isn't making steady profits.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Tiga Gaming shareholders are down 56% for the year, but the broader market is up 2.6%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. The three-year loss of 38% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. It's always interesting to track share price performance over the longer term. But to understand Tiga Gaming better, we need to consider many other factors. Case in point: We've spotted 5 warning signs for Tiga Gaming you should be aware of.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on TW exchanges.
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