Strong week for TY Holdings (KRX:363280) shareholders doesn't alleviate pain of five-year loss

TY Holdings Co., Ltd (KRX:363280) shareholders should be happy to see the share price up 10% in the last week. But will that heal all the wounds inflicted over 5 years of declines? Unlikely. In fact, the share price has tumbled down a mountain to land 88% lower after that period. It's true that the recent bounce could signal the company is turning over a new leaf, but we are not so sure. The fundamental business performance will ultimately determine if the turnaround can be sustained. While a drop like that is definitely a body blow, money isn't as important as health and happiness.

On a more encouraging note the company has added ₩9.2b to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

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TY Holdings isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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 would hope for good top-line growth to make up for the lack of earnings.

In the last five years TY Holdings saw its revenue shrink by 39% per year. That's definitely a weaker result than most pre-profit companies report. So it's not that strange that the share price dropped 13% per year in that period. This kind of price performance makes us very wary, especially when combined with falling revenue. Ironically, that behavior could create an opportunity for the contrarian investor - but only if there are good reasons to predict a brighter future.

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

This free interactive report on TY Holdings' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

TY Holdings shareholders are down 7.1% for the year, but the market itself is up 62%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 13% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. It's always interesting to track share price performance over the longer term. But to understand TY Holdings better, we need to consider many other factors. Take risks, for example - TY Holdings has 2 warning signs (and 1 which can't be ignored) we think you should know about.

But note: TY Holdings 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 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.