Even though Kinatico (ASX:KYP) has lost AU$26m market cap in last 7 days, shareholders are still up 209% over 3 years

Kinatico Ltd (ASX:KYP) shareholders might be concerned after seeing the share price drop 19% in the last month. In contrast, the return over three years has been impressive. The share price marched upwards over that time, and is now 209% higher than it was. 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.

While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

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While Kinatico made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

Over the last three years Kinatico has grown its revenue at 6.3% annually. Considering the company is losing money, we think that rate of revenue growth is uninspiring. In comparison, the share price rise of 46% per year over the last three years is pretty impressive. Shareholders should be pretty happy with that, although interested investors might want to examine the financial data more closely to see if the gains are really justified. It may be that the market is pretty optimistic about Kinatico if you look to the bottom line.

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

We know that Kinatico has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Kinatico's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's nice to see that Kinatico shareholders have received a total shareholder return of 112% over the last year. That's better than the annualised return of 8% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Kinatico , and understanding them should be part of your investment process.

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 Australian 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.