The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the long term shareholders of Geospace Technologies Corporation (NASDAQ:GEOS) have had an unfortunate run in the last three years. Regrettably, they have had to cope with a 65% drop in the share price over that period. And over the last year the share price fell 32%, so we doubt many shareholders are delighted. And the share price decline continued over the last week, dropping some 11%. However, this move may have been influenced by the broader market, which fell 10% in that time.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
Geospace Technologies isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Over three years, Geospace Technologies grew revenue at 2.8% per year. That's not a very high growth rate considering it doesn't make profits. It's likely this weak growth has contributed to an annualised return of 18% for the last three years. It can be well worth keeping an eye on growth stocks that disappoint the market, because sometimes they re-accelerate. Keep in mind it isn't unusual for good businesses to have a tough time or a couple of uninspiring years.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. This free interactive report on Geospace Technologies' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
While the broader market lost about 9.4% in the twelve months, Geospace Technologies shareholders did even worse, losing 32%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Geospace Technologies (of which 1 is a bit concerning!) you should know about.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.