Further weakness as Unitika (TSE:3103) drops 23% this week, taking three-year losses to 34%

Many investors define successful investing as beating the market average over the long term. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term Unitika Ltd. (TSE:3103) shareholders have had that experience, with the share price dropping 34% in three years, versus a market return of about 19%. And the share price decline continued over the last week, dropping some 23%. But this could be related to the soft market, which is down about 19% in the same period.

With the stock having lost 23% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

View our latest analysis for Unitika

Given that Unitika 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over three years, Unitika grew revenue at 2.2% per year. That's not a very high growth rate considering it doesn't make profits. Indeed, the stock dropped 10% over the last three years. If revenue growth accelerates, we might see the share price bounce. But the real upside for shareholders will be if the company can start generating profits.

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

If you are thinking of buying or selling Unitika stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

We're pleased to report that Unitika shareholders have received a total shareholder return of 9.0% over one year. There's no doubt those recent returns are much better than the TSR loss of 6% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Unitika (of which 2 are significant!) you should know about.

We will like Unitika better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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

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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.

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