Even the best stock pickers will make plenty of bad investments. And unfortunately for Kooth plc (LON:KOO) shareholders, the stock is a lot lower today than it was a year ago. The share price is down a hefty 65% in that time. Because Kooth hasn't been listed for many years, the market is still learning about how the business performs. The falls have accelerated recently, with the share price down 39% in the last three months.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
Kooth isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Kooth grew its revenue by 28% over the last year. We think that is pretty nice growth. Meanwhile, the share price tanked 65%, suggesting the market had much higher expectations. It may well be that the business remains approximately on track, but its revenue growth has simply been delayed. For us it's important to consider when you think a company will become profitable, if you're basing your valuation on revenue.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Kooth shareholders are down 65% for the year, even worse than the market loss of 7.8%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. The share price decline has continued throughout the most recent three months, down 39%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. It's always interesting to track share price performance over the longer term. But to understand Kooth better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with Kooth (including 1 which is a bit unpleasant) .
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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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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.
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