Should Kong Sun Holdings (HKG:295) Be Disappointed With Their 86% Profit?

Passive investing in index funds can generate returns that roughly match the overall market. But if you pick the right individual stocks, you could make more than that. To wit, the Kong Sun Holdings Limited (HKG:295) share price is 86% higher than it was a year ago, much better than the market return of around 16% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! Zooming out, the stock is actually down 52% in the last three years.

View our latest analysis for Kong Sun Holdings

Kong Sun 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 Kong Sun Holdings saw its revenue shrink by 22%. The stock is up 86% in that time, a fine performance given the revenue drop. To us that means that there isn't a lot of correlation between the past revenue performance and the share price, but a closer look at analyst forecasts and the bottom line may well explain a lot.

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

This free interactive report on Kong Sun Holdings' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's good to see that Kong Sun Holdings has rewarded shareholders with a total shareholder return of 86% in the last twelve months. Notably the five-year annualised TSR loss of 12% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the 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 Kong Sun Holdings (at least 1 which can't be ignored) , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.

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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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