Gigastorage (TWSE:2406 shareholders incur further losses as stock declines 14% this week, taking three-year losses to 51%

If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. Long term Gigastorage Corporation (TWSE:2406) shareholders know that all too well, since the share price is down considerably over three years. Sadly for them, the share price is down 51% in that time. And more recent buyers are having a tough time too, with a drop of 34% in the last year. More recently, the share price has dropped a further 16% in a month.

Since Gigastorage has shed NT$719m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Given that Gigastorage 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

Over the last three years, Gigastorage's revenue dropped 18% per year. That means its revenue trend is very weak compared to other loss making companies. With no profits and falling revenue it is no surprise that investors have been dumping the stock, pushing the price down by 15% per year over that time. When revenue is dropping, and losses are still costing, and the share price sinking fast, it's fair to ask if something is remiss. After losing money on a declining business with falling stock price, we always consider whether eager bagholders are still offering us a reasonable exit price.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

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

A Different Perspective

Investors in Gigastorage had a tough year, with a total loss of 34%, against a market gain of about 8.1%. 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. On the bright side, long term shareholders have made money, with a gain of 7% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Case in point: We've spotted 2 warning signs for Gigastorage you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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