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Q&K International Group Limited (NASDAQ:QK) has rebounded strongly over the last week, with the share price soaring 43%. But that is meagre solace when you consider how the price has plummeted over the last year. Indeed, the share price is down a whopping 80% in the last year. It's not uncommon to see a bounce after a drop like that. The bigger issue is whether the company can sustain the momentum in the long term. While a drop like that is definitely a body blow, money isn't as important as health and happiness.
Although the past week has been more reassuring for shareholders, they're still in the red over the last year, so let's see if the underlying business has been responsible for the decline.
Because Q&K International Group 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Q&K International Group's revenue didn't grow at all in the last year. In fact, it fell 14%. That's not what investors generally want to see. The market obviously agrees, since the share price tanked 80%. That's a stern reminder that profitless companies need to grow the top line, at the very least. Of course, extreme share price falls can be an opportunity for those who are willing to really dig deeper to understand a high risk company like this.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Take a more thorough look at Q&K International Group's financial health with this free report on its balance sheet.
A Different Perspective
We doubt Q&K International Group shareholders are happy with the loss of 80% over twelve months. That falls short of the market, which lost 10%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. With the stock down 35% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. 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. Even so, be aware that Q&K International Group is showing 5 warning signs in our investment analysis , and 4 of those are potentially serious...
We will like Q&K International Group better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.