Strong week for GCL Technology Holdings (HKG:3800) shareholders doesn't alleviate pain of five-year loss

GCL Technology Holdings Limited (HKG:3800) shareholders should be happy to see the share price up 11% in the last month. But that is little comfort to those holding over the last half decade, sitting on a big loss. The share price has failed to impress anyone , down a sizable 61% during that time. So we're not so sure if the recent bounce should be celebrated. We'd err towards caution given the long term under-performance.

While the last five years has been tough for GCL Technology Holdings shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

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Because GCL Technology Holdings 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 desire strong revenue growth. 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 five years, GCL Technology Holdings grew its revenue at 4.1% 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 10% for the last five years. We want to see an acceleration of revenue growth (or profits) before showing much interest in this one. When a stock falls hard like this, some investors like to add the company to a watchlist (in case the business recovers, longer term).

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

GCL Technology Holdings is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.

A Different Perspective

GCL Technology Holdings provided a TSR of 2.6% over the last twelve months. But that return falls short of the market. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 10% endured over half a decade. So this might be a sign the business has turned its fortunes around. It's always interesting to track share price performance over the longer term. But to understand GCL Technology Holdings better, we need to consider many other factors. For instance, we've identified 1 warning sign for GCL Technology Holdings that you should be aware of.

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