Introducing GeneFerm Biotechnology (GTSM:1796), The Stock That Slid 63% In The Last Three Years

If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But the long term shareholders of GeneFerm Biotechnology Co., Ltd. (GTSM:1796) have had an unfortunate run in the last three years. Regrettably, they have had to cope with a 63% drop in the share price over that period. And over the last year the share price fell 40%, so we doubt many shareholders are delighted. There was little comfort for shareholders in the last week as the price declined a further 2.0%.

See our latest analysis for GeneFerm Biotechnology

Because GeneFerm Biotechnology 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

Over the last three years, GeneFerm Biotechnology's revenue dropped 11% per year. That is not a good result. The share price decline of 28% compound, over three years, is understandable given the company doesn't have profits to boast of, and revenue is moving in the wrong direction. Of course, it's the future that will determine whether today's price is a good one. We'd be pretty wary of this one until it makes a profit, because we don't specialize in finding turnaround situations.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of GeneFerm Biotechnology, it has a TSR of -60% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

The last twelve months weren't great for GeneFerm Biotechnology shares, which cost holders 39% , including dividends , while the market was up about 27%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The three-year loss of 27% 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. Although Warren Buffett famously said he likes to 'buy when there is blood on the streets', he also focusses on high quality stocks with solid prospects. 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. Take risks, for example - GeneFerm Biotechnology has 4 warning signs (and 2 which make us uncomfortable) we think you should know about.

Of course GeneFerm Biotechnology may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.