Investors in New Zealand King Salmon Investments (NZSE:NZK) from three years ago are still down 76%, even after 18% gain this past week

This week we saw the New Zealand King Salmon Investments Limited (NZSE:NZK) share price climb by 18%. But that doesn't change the fact that the returns over the last three years have been stomach churning. To wit, the share price sky-dived 88% in that time. So it sure is nice to see a bit of an improvement. Of course the real question is whether the business can sustain a turnaround. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.

Our analysis indicates that NZK is potentially overvalued!

New Zealand King Salmon Investments 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 expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over three years, New Zealand King Salmon Investments grew revenue at 2.7% per year. That's not a very high growth rate considering it doesn't make profits. But the share price crash at 23% per year does seem a bit harsh! We generally don't try to 'catch the falling knife'. Before considering a purchase, take a look at the losses the company is racking up.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

If you are thinking of buying or selling New Zealand King Salmon Investments stock, you should check out this FREE detailed report on its balance sheet.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between New Zealand King Salmon Investments' total shareholder return (TSR) and its share price change, which we've covered above. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Dividends have been really beneficial for New Zealand King Salmon Investments shareholders, and that cash payout explains why its total shareholder loss of 76%, over the last 3 years, isn't as bad as the share price return.

A Different Perspective

While the broader market lost about 13% in the twelve months, New Zealand King Salmon Investments shareholders did even worse, losing 63%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 12% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. For instance, we've identified 3 warning signs for New Zealand King Salmon Investments (2 are a bit concerning) that you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on NZ 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.