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Generally speaking long term investing is the way to go. But no-one is immune from buying too high. For example, after five long years the Kromek Group plc (LON:KMK) share price is a whole 67% lower. That's an unpleasant experience for long term holders. And it's not just long term holders hurting, because the stock is down 38% in the last year.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
Check out our latest analysis for Kromek Group
Kromek Group isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect 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.
Over five years, Kromek Group grew its revenue at 4.7% per year. That's not a very high growth rate considering it doesn't make profits. This lacklustre growth has no doubt fueled the loss of 11% per year, in that time. We'd want to see proof that future revenue growth is likely to be significantly stronger before getting too interested in Kromek Group. However, it's possible too many in the market will ignore it, and there may be an opportunity if it starts to recover down the track.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What about the Total Shareholder Return (TSR)?
We've already covered Kromek Group's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Kromek Group hasn't been paying dividends, but its TSR of -63% exceeds its share price return of -67%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
While the broader market lost about 4.8% in the twelve months, Kromek Group shareholders did even worse, losing 38%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. 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. 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. Case in point: We've spotted 3 warning signs for Kromek Group you should be aware of.