The simplest way to benefit from a rising market is to buy an index fund. But if you buy individual stocks, you can do both better or worse than that. Investors in Gallant Venture Ltd. (SGX:5IG) have tasted that bitter downside in the last year, as the share price dropped 49%. That falls noticeably short of the market return of around 21%. We note that it has not been easy for shareholders over three years, either; the share price is down 47% in that time. Unfortunately the share price momentum is still quite negative, with prices down 24% in thirty days.

After losing 13% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

SGX:5IG

The simplest way to benefit from a rising market is to buy an index fund. But if you buy individual stocks, you can do both better or worse than that. Investors in Gallant Venture Ltd. (SGX:5IG) have tasted that bitter downside in the last year, as the share price dropped 49%. That falls noticeably short of the market return of around 21%. We note that it has not been easy for shareholders over three years, either; the share price is down 47% in that time. Unfortunately the share price momentum is still quite negative, with prices down 24% in thirty days.

After losing 13% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

Because Gallant Venture 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. When a company doesn't make profits, we'd generally hope to see good revenue growth. 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.

Gallant Venture grew its revenue by 5.0% over the last year. That's not a very high growth rate considering it doesn't make profits. Given this lacklustre revenue growth, the share price drop of 49% seems pretty appropriate. In a hot market it's easy to forget growth is the life-blood of a loss making company. But if you buy a loss making company then you could become a loss making investor.

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

A Different Perspective

Investors in Gallant Venture had a tough year, with a total loss of 49%, against a market gain of about 21%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 7% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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.