For many, the main point of investing is to generate higher returns than the overall market. But the main game is to find enough winners to more than offset the losers At this point some shareholders may be questioning their investment in Kuznetsky Bank Public Joint Stock Company (MCX:KUZB), since the last five years saw the share price fall 50%.
While Kuznetsky Bank made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. Generally speaking, we’d consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.
Over five years, Kuznetsky Bank grew its revenue at 9.9% per year. That’s a fairly respectable growth rate. We doubt many shareholders are ok with the fact the share price has fallen 13% each year for half a decade. Those who bought back then clearly believed in stronger growth – and maybe even profits. The lesson is that if you buy shares in a money losing company you could end up losing money.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
Balance sheet strength is crucual. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Dividend Lost
It’s important to keep in mind that we’ve been talking about the share price returns, which don’t include dividends, while the total shareholder return does. In some ways, TSR is a better measure of how well an investment has performed. Kuznetsky Bank’s TSR over the last 5 years is -42%; better than its share price return. Although the company had to cut dividends, it has paid cash to shareholders in the past.
A Different Perspective
Kuznetsky Bank shareholders are down 13% for the year, but the market itself is up 17%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 10% per year over five years. We realise that Buffett has said investors should ‘buy when there is blood on the streets’, but we caution that investors should first be sure they are buying a high quality businesses. Before forming an opinion on Kuznetsky Bank you might want to consider these 3 valuation metrics.
But note: Kuznetsky Bank 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 RU exchanges.
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If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.