Even though kneat.com (TSE:KSI) has lost CA$77m market cap in last 7 days, shareholders are still up 85% over 5 years

It might be of some concern to shareholders to see the kneat.com, inc. (TSE:KSI) share price down 26% in the last month. But at least the stock is up over the last five years. In that time, it is up 85%, which isn't bad, but is below the market return of 103%.

Since the long term performance has been good but there's been a recent pullback of 16%, let's check if the fundamentals match the share price.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

While kneat.com 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. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last 5 years kneat.com saw its revenue grow at 39% per year. That's well above most pre-profit companies. While the compound gain of 13% per year is good, it's not unreasonable given the strong revenue growth. If the strong revenue growth continues, we'd hope to see the share price to follow, in time. Opportunity lies where the market hasn't fully priced growth in the underlying business.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

We know that kneat.com has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on kneat.com

A Different Perspective

While the broader market gained around 23% in the last year, kneat.com shareholders lost 15%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 13%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand kneat.com better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for kneat.com you should know about.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Canadian exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.