This month, we saw the Koovs plc (LON:KOOV) up an impressive 40%. But will that heal all the wounds inflicted over 5 years of declines? Unlikely. Five years have seen the share price descend precipitously, down a full 98%. The recent bounce might mean the long decline is over, but we are not confident. The fundamental business performance will ultimately determine if the turnaround can be sustained.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
Because Koovs is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last half decade, Koovs saw its revenue increase by 15% per year. That's well above most other pre-profit companies. So it's not at all clear to us why the share price sunk 54% throughout that time. It could be that the stock was over-hyped before. We'd recommend carefully checking for indications of future growth - and balance sheet threats - before considering a purchase.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. So it makes a lot of sense to check out what analysts think Koovs will earn in the future (free profit forecasts).
A Different Perspective
Investors in Koovs had a tough year, with a total loss of 64%, against a market gain of about 9.0%. 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 54% 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. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
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 GB exchanges.
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