Did Business Growth Power Kingsgate Consolidated's (ASX:KCN) Share Price Gain of 156%?

By
Simply Wall St
Published
March 17, 2021
ASX:KCN
Source: Shutterstock

It might be of some concern to shareholders to see the Kingsgate Consolidated Limited (ASX:KCN) share price down 12% in the last month. In contrast, the return over three years has been impressive. In three years the stock price has launched 156% higher: a great result. After a run like that some may not be surprised to see prices moderate. The thing to consider is whether the underlying business is doing well enough to support the current price.

Check out our latest analysis for Kingsgate Consolidated

Kingsgate Consolidated 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 fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last 3 years Kingsgate Consolidated saw its revenue shrink by 15% per year. So the share price gain of 37% per year is quite surprising. It's fair to say shareholders are definitely counting on a bright future.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth
ASX:KCN Earnings and Revenue Growth March 17th 2021

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

We're pleased to report that Kingsgate Consolidated shareholders have received a total shareholder return of 122% over one year. That gain is better than the annual TSR over five years, which is 17%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Case in point: We've spotted 2 warning signs for Kingsgate Consolidated you should be aware of, and 1 of them makes us a bit uncomfortable.

We will like Kingsgate Consolidated 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 AU exchanges.

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This article by Simply Wall St is general in nature. 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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Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.