KuangChi Science's (HKG:439) growing losses don't faze investors as the stock jumps 11% this past week

KuangChi Science Limited (HKG:439) shareholders might be concerned after seeing the share price drop 28% in the last quarter. But that doesn't detract from the splendid returns of the last year. Like an eagle, the share price soared 162% in that time. So some might not be surprised to see the price retrace some. Investors should be wondering whether the business itself has the fundamental value required to continue to drive gains.

Since the stock has added HK$86m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

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

Given that KuangChi Science didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally hope to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

KuangChi Science actually shrunk its revenue over the last year, with a reduction of 9.2%. We're a little surprised to see the share price pop 162% in the last year. It just goes to show the market doesn't always pay attention to the reported numbers. Of course, it could be that the market expected this revenue drop.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on KuangChi Science's earnings, revenue and cash flow.

A Different Perspective

It's nice to see that KuangChi Science shareholders have received a total shareholder return of 162% over the last year. Notably the five-year annualised TSR loss of 7% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. 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 1 warning sign for KuangChi Science that you should be aware of before investing here.

Of course KuangChi Science may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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