When you buy a stock there is always a possibility that it could drop 100%. But on a lighter note, a good company can see its share price rise well over 100%. One great example is Kuangli Photoelectric Technology Co., Ltd. (TPE:6431) which saw its share price drive 248% higher over five years. Also pleasing for shareholders was the 14% gain in the last three months. But this could be related to the strong market, which is up 19% in the last three months.
Kuangli Photoelectric Technology 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over the last half decade Kuangli Photoelectric Technology's revenue has actually been trending down at about 1.7% per year. On the other hand, the share price done the opposite, gaining 28%, compound, each year. It just goes to show tht the market is forward looking, and it's not always easy to predict the future based on past trends. Still, we are a bit cautious in this kind of situation.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Take a more thorough look at Kuangli Photoelectric Technology's financial health with this free report on its balance sheet.
A Different Perspective
Kuangli Photoelectric Technology shareholders are up 14% for the year. But that return falls short of the market. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 28% over five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. 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. For instance, we've identified 1 warning sign for Kuangli Photoelectric Technology that you should be aware of.
If you are like me, then you will not want to miss this free list of growing companies 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 TW exchanges.
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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. 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.
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