Kromek Group (LON:KMK) adds UK£6.6m to market cap in the past 7 days, though investors from five years ago are still down 74%
Over the last month the Kromek Group plc (LON:KMK) has been much stronger than before, rebounding by 41%. But that doesn't change the fact that the returns over the last half decade have been stomach churning. In fact, the share price has tumbled down a mountain to land 74% lower after that period. So we don't gain too much confidence from the recent recovery. The important question is if the business itself justifies a higher share price in the long term.
On a more encouraging note the company has added UK£6.6m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.
View our latest analysis for Kromek Group
Kromek Group wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. 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 half decade, Kromek Group saw its revenue increase by 4.0% per year. That's far from impressive given all the money it is losing. It's not so sure that share price crash of 12% per year is completely deserved, but the market is doubtless disappointed. We'd be pretty cautious about this one, although the sell-off may be too severe. We'd recommend focussing any further research on the likelihood of profitability in the foreseeable future, given the muted revenue growth.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Take a more thorough look at Kromek Group's financial health with this free report on its balance sheet.
A Different Perspective
While the broader market lost about 2.5% in the twelve months, Kromek Group shareholders did even worse, losing 25%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 12% 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. 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. Take risks, for example - Kromek Group has 5 warning signs (and 1 which doesn't sit too well with us) we think you should know about.
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 British 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.
