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It might be of some concern to shareholders to see the Kingsgate Consolidated Limited (ASX:KCN) share price down 12% in the last month. In contrast, the return over three years has been impressive. In fact, the share price is up a full 156% compared to three years ago. To some, the recent share price pullback wouldn't be surprising after such a good run. The thing to consider is whether the underlying business is doing well enough to support the current price.
Because Kingsgate Consolidated 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. 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 does expect good top-line growth.
In the last 3 years Kingsgate Consolidated saw its revenue shrink by 15% per year. So we wouldn't have expected the share price to gain 37% per year, but it has. It's fair to say shareholders are definitely counting on a bright future.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
If you are thinking of buying or selling Kingsgate Consolidated stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
It's good to see that Kingsgate Consolidated has rewarded shareholders with a total shareholder return of 122% in the last twelve months. That's better than the annualised return of 17% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. To that end, you should learn about the 2 warning signs we've spotted with Kingsgate Consolidated (including 1 which makes us a bit uncomfortable) .
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
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. 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.
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