Further weakness as SK Innovation (KRX:096770) drops 14% this week, taking three-year losses to 53%

Investing in stocks inevitably means buying into some companies that perform poorly. But the last three years have been particularly tough on longer term SK Innovation Co., Ltd. (KRX:096770) shareholders. So they might be feeling emotional about the 54% share price collapse, in that time. And more recent buyers are having a tough time too, with a drop of 29% in the last year. More recently, the share price has dropped a further 14% in a month. But this could be related to poor market conditions -- stocks are down 8.0% in the same time.

Since SK Innovation has shed ₩2.2t from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out our latest analysis for SK Innovation

Given that SK Innovation 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.

In the last three years, SK Innovation saw its revenue grow by 22% per year, compound. That is faster than most pre-profit companies. The share price has moved in quite the opposite direction, down 15% over that time, a bad result. It seems likely that the market is worried about the continual losses. When we see revenue growth, paired with a falling share price, we can't help wonder if there is an opportunity for those who are willing to dig deeper.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

SK Innovation is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think SK Innovation will earn in the future (free analyst consensus estimates)

A Different Perspective

While the broader market lost about 2.5% in the twelve months, SK Innovation shareholders did even worse, losing 29%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 6% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. For example, we've discovered 2 warning signs for SK Innovation that you should be aware of before investing here.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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

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

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.