Investors push ESTsoft (KOSDAQ:047560) 10% lower this week, company's increasing losses might be to blame

It's been a soft week for ESTsoft Corp. (KOSDAQ:047560) shares, which are down 10%. But that scarcely detracts from the really solid long term returns generated by the company over five years. Indeed, the share price is up an impressive 123% in that time. We think it's more important to dwell on the long term returns than the short term returns. Ultimately business performance will determine whether the stock price continues the positive long term trend.

Since the long term performance has been good but there's been a recent pullback of 10%, let's check if the fundamentals match the share price.

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ESTsoft wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last 5 years ESTsoft saw its revenue grow at 5.1% per year. Put simply, that growth rate fails to impress. In comparison, the share price rise of 17% per year over the last half a decade is pretty impressive. While we wouldn't be overly concerned, it might be worth checking whether you think the fundamental business gains really justify the share price action. It may be that the market is pretty optimistic about ESTsoft.

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

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

ESTsoft provided a TSR of 36% over the last twelve months. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 17% per year over five year. It is possible that returns will improve along with the business fundamentals. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.

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.