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This month, we saw the NNK Group Limited (HKG:3773) up an impressive 41%. But in truth the last year hasn’t been good for the share price. In fact the stock is down 49% in the last year, well below the market return.
Because NNK Group is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
NNK Group’s revenue didn’t grow at all in the last year. In fact, it fell 27%. That’s not what investors generally want to see. Shareholders have seen the share price drop 49% in that time. What would you expect when revenue is falling, and it doesn’t make a profit? We think most holders must believe revenue growth will improve, or else costs will decline.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
Take a more thorough look at NNK Group’s financial health with this free report on its balance sheet.
What about the Total Shareholder Return (TSR)?
Investors should note that there’s a difference between NNK Group’s total shareholder return (TSR) and its share price change, which we’ve covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. NNK Group’s TSR of was a loss of 49% for the year. That wasn’t as bad as its share price return, because it has paid dividends.
A Different Perspective
The last twelve months weren’t great for NNK Group shares, which performed worse than the market, costing holders 49%. Meanwhile, the broader market slid about 10%, likely weighing on the stock. Shareholders have lost 10% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
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 HK exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.