Investors in K3 Business Technology Group (LON:KBT) have unfortunately lost 35% over the last year
Investors can approximate the average market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by K3 Business Technology Group plc (LON:KBT) shareholders over the last year, as the share price declined 35%. That's disappointing when you consider the market declined 8.0%. Even if you look out three years, the returns are still disappointing, with the share price down32% in that time. The falls have accelerated recently, with the share price down 19% in the last three months.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
See our latest analysis for K3 Business Technology Group
Given that K3 Business Technology Group didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. 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 year K3 Business Technology Group saw its revenue grow by 6.8%. That's not a very high growth rate considering it doesn't make profits. Given this fairly low revenue growth (and lack of profits), it's not particularly surprising to see the stock down 35% in a year. It's important not to lose sight of the fact that profitless companies must grow. So remember, if you buy a profitless company then you risk being a profitless investor.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
While the broader market lost about 8.0% in the twelve months, K3 Business Technology Group shareholders did even worse, losing 35%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5% per year over five years. We realise that Baron Rothschild 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 business. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with K3 Business Technology Group (at least 1 which is potentially serious) , and understanding them should be part of your investment process.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
