Is Kelfred Holdings' (HKG:1134) Share Price Gain Of 256% Well Earned?

When you buy shares in a company, there is always a risk that the price drops to zero. But if you pick the right business to buy shares in, you can make more than you can lose. For example, the Kelfred Holdings Limited (HKG:1134) share price had more than doubled in just one year - up 256%. It's up an even more impressive 384% over the last quarter. Note that businesses generally develop over the long term, so the returns over the last year might not reflect a long term trend.

See our latest analysis for Kelfred Holdings

Kelfred Holdings wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last year Kelfred Holdings saw its revenue shrink by 18%. We're a little surprised to see the share price pop 256% in the last year. This is a good example of how buyers can push up prices even before the fundamental metrics show much growth. It's quite likely the revenue fall was already priced in, anyway.

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

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Kelfred Holdings' TSR for the last year was 268%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Kelfred Holdings shareholders should be happy with the total gain of 268% over the last twelve months, including dividends. A substantial portion of that gain has come in the last three months, with the stock up 384% in that time. Demand for the stock from multiple parties is pushing the price higher; it could be that word is getting out about its virtues as a business. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Kelfred Holdings (at least 1 which is potentially serious) , and understanding them should be part of your investment process.

But note: Kelfred Holdings may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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