While not a mind-blowing move, it is good to see that the Capro Corporation (KRX:006380) share price has gained 21% in the last three months. Meanwhile over the last three years the stock has dropped hard. Indeed, the share price is down a tragic 62% in the last three years. So the improvement may be a real relief to some. Perhaps the company has turned over a new leaf.
Given that Capro 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last three years Capro saw its revenue shrink by 16% per year. That's definitely a weaker result than most pre-profit companies report. With no profits and falling revenue it is no surprise that investors have been dumping the stock, pushing the price down by 17% per year over that time. Bagholders or 'baggies' are people who buy more of a stock as the price collapses. They are then left 'holding the bag' if the shares turn out to be worthless. After losing money on a declining business with falling stock price, we always consider whether eager bagholders are still offering us a reasonable exit price.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
This free interactive report on Capro's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Capro provided a TSR of 20% over the last twelve months. Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 7% per year over five year. It is possible that returns will improve along with the business fundamentals. 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. To that end, you should learn about the 2 warning signs we've spotted with Capro (including 1 which is potentially serious) .
Of course Capro may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on KR exchanges.
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