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It's easy to match the overall market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Unfortunately the Fayenceries de Sarreguemines, Digoin & Vitry-le-Francois Société Anonyme (EPA:FAYE) share price slid 22% over twelve months. That's disappointing when you consider the market returned 5.3%. Even if shareholders bought some time ago, they wouldn't be particularly happy: the stock is down 19% in three years. On top of that, the share price has dropped a further 14% in a month. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.

View our latest analysis for Fayenceries de Sarreguemines Digoin & Vitry-le-Francois Société Anonyme

Fayenceries de Sarreguemines Digoin & Vitry-le-Francois Société Anonyme didn't have any revenue in the last year, so it's fair to say it doesn't yet have a proven product (or at least not one people are paying for). We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). Investors will be hoping that Fayenceries de Sarreguemines Digoin & Vitry-le-Francois Société Anonyme can make progress and gain better traction for the business, before it runs low on cash.

As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some such companies do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized).

Fayenceries de Sarreguemines Digoin & Vitry-le-Francois Société Anonyme has plenty of cash in the bank, with cash in excess of all liabilities sitting at €3.6m, when it last reported (September 2018). This gives management the flexibility to drive business growth, without worrying too much about cash reserves. But since the share price has dropped 22% in the last year, it seems like the market might have been over-excited previously. You can click on the image below to see (in greater detail) how Fayenceries de Sarreguemines Digoin & Vitry-le-Francois Société Anonyme's cash levels have changed over time.

In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. What if insiders are ditching the stock hand over fist? I'd like that just about as much as I like to drink milk and fruit juice mixed together. You can click here to see if there are insiders selling.

A Different Perspective

Investors in Fayenceries de Sarreguemines Digoin & Vitry-le-Francois Société Anonyme had a tough year, with a total loss of 22%, against a market gain of about 5.3%. 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 3.0% per year over five years. We realise that Buffett 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 businesses. You could get a better understanding of Fayenceries de Sarreguemines Digoin & Vitry-le-Francois Société Anonyme's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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

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.

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. Thank you for reading.