Even though Kuramoto (TSE:5216) has lost JP¥1.9b market cap in last 7 days, shareholders are still up 140% over 1 year

It's been a soft week for Kuramoto Co., Ltd. (TSE:5216) shares, which are down 14%. On the other hand, over the last twelve months the stock has delivered rather impressive returns. Like an eagle, the share price soared 140% in that time. So it may be that the share price is simply cooling off after a strong rise. The real question is whether the business is trending in the right direction.

While the stock has fallen 14% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

See our latest analysis for Kuramoto

We don't think that Kuramoto's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.

In the last year Kuramoto saw its revenue shrink by 1.4%. We're a little surprised to see the share price pop 140% in the last year. This is a good example of how buyers can push up prices even before the fundamental metrics show much growth. Of course, it could be that the market expected this revenue drop.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Take a more thorough look at Kuramoto's financial health with this free report on its balance sheet.

A Different Perspective

It's nice to see that Kuramoto shareholders have received a total shareholder return of 140% over the last year. That gain is better than the annual TSR over five years, which is 6%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. To that end, you should learn about the 4 warning signs we've spotted with Kuramoto (including 3 which make us uncomfortable) .

But note: Kuramoto 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 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.