SM Culture & Contents (KOSDAQ:048550) adds ₩15b to market cap in the past 7 days, though investors from three years ago are still down 59%

SM Culture & Contents Co., Ltd. (KOSDAQ:048550) shareholders should be happy to see the share price up 11% in the last week. Meanwhile over the last three years the stock has dropped hard. Indeed, the share price is down a tragic 59% in the last three years. Some might say the recent bounce is to be expected after such a bad drop. While many would remain nervous, there could be further gains if the business can put its best foot forward.

The recent uptick of 11% could be a positive sign of things to come, so let's take a look at historical fundamentals.

View our latest analysis for SM Culture & Contents

Because SM Culture & Contents made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually desire strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

In the last three years SM Culture & Contents saw its revenue shrink by 4.4% per year. That's not what investors generally want to see. With revenue in decline, and profit but a dream, we can understand why the share price has been declining at 17% per year. Of course, it's the future that will determine whether today's price is a good one. We'd be pretty wary of this one until it makes a profit, because we don't specialize in finding turnaround situations.

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

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

While the broader market lost about 1.2% in the twelve months, SM Culture & Contents shareholders did even worse, losing 12%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Take risks, for example - SM Culture & Contents has 1 warning sign we think you should be aware of.

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 South Korean 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.