SONOKONG (KOSDAQ:066910) dips 11% this week as increasing losses might not be inspiring confidence among its investors

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But if you try your hand at stock picking, your risk returning less than the market. We regret to report that long term SONOKONG Co., Ltd. (KOSDAQ:066910) shareholders have had that experience, with the share price dropping 34% in three years, versus a market decline of about 7.1%. Even worse, it's down 18% in about a month, which isn't fun at all. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.

With the stock having lost 11% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for SONOKONG

SONOKONG isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over the last three years, SONOKONG's revenue dropped 16% per year. That's definitely a weaker result than most pre-profit companies report. On the face of it we'd posit the share price fall of 10% compound, over three years is well justified by the fundamental deterioration. The key question now is whether the company has the capacity to fund itself to profitability, without more cash. Of course, it is possible for businesses to bounce back from a revenue drop - but we'd want to see that before getting interested.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

This free interactive report on SONOKONG's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

We're pleased to report that SONOKONG shareholders have received a total shareholder return of 13% over one year. Notably the five-year annualised TSR loss of 0.1% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. For example, we've discovered 4 warning signs for SONOKONG (1 is concerning!) that you should be aware of before investing here.

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 South Korean 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.