Investors push Seronics (KOSDAQ:042600) 11% lower this week, company's increasing losses might be to blame

It's been a soft week for Seronics Co., Ltd. (KOSDAQ:042600) shares, which are down 11%. But that doesn't change the fact that the returns over the last five years have been very strong. Indeed, the share price is up an impressive 147% in that time. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Ultimately business performance will determine whether the stock price continues the positive long term trend. Unfortunately not all shareholders will have held it for five years, so spare a thought for those caught in the 31% decline over the last three years: that's a long time to wait for profits.

In light of the stock dropping 11% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

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Because Seronics 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

For the last half decade, Seronics can boast revenue growth at a rate of 4.2% per year. That's not a very high growth rate considering the bottom line. In comparison, the share price rise of 20% 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 Seronics.

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 Seronics' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Seronics shareholders are up 7.7% for the year. But that was short of the market average. On the bright side, the longer term returns (running at about 20% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. It's always interesting to track share price performance over the longer term. But to understand Seronics better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Seronics , and understanding them should be part of your investment process.

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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.