Strong week for K2A Knaust & Andersson Fastigheter (STO:K2A B) shareholders doesn't alleviate pain of three-year loss

K2A Knaust & Andersson Fastigheter AB (publ) (STO:K2A B) shareholders should be happy to see the share price up 16% in the last week. But the last three years have seen a terrible decline. To wit, the share price sky-dived 90% 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 feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

The recent uptick of 16% could be a positive sign of things to come, so let's take a look at historical fundamentals.

See our latest analysis for K2A Knaust & Andersson Fastigheter

Given that K2A Knaust & Andersson Fastigheter didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last three years, K2A Knaust & Andersson Fastigheter saw its revenue grow by 23% per year, compound. That is faster than most pre-profit companies. So on the face of it we're really surprised to see the share price down 24% a year in the same time period. The share price makes us wonder if there is an issue with profitability. Ultimately, revenue growth doesn't amount to much if the business can't scale well. If the company is low on cash, it may have to raise capital soon.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

If you are thinking of buying or selling K2A Knaust & Andersson Fastigheter stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While the broader market gained around 19% in the last year, K2A Knaust & Andersson Fastigheter shareholders lost 42%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% per year over five years. 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with K2A Knaust & Andersson Fastigheter (at least 2 which don't sit too well with us) , and understanding them should be part of your investment process.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com