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If you want to compound wealth in the stock market, you can do so by buying an index fund. But investors can boost returns by picking market-beating companies to own shares in. For example, the Kingsoft Corporation Limited (HKG:3888) share price is up 28% in the last year, clearly besting the market return of around -6.4% (not including dividends). That's a solid performance by our standards! Unfortunately the longer term returns are not so good, with the stock falling 11% in the last three years.
See our latest analysis for Kingsoft
Kingsoft isn't a profitable company, so 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Kingsoft grew its revenue by 30% last year. That's a fairly respectable growth rate. Buyers pushed the share price 28% in response, which isn't unreasonable. If revenue stays on trend, there may be plenty more share price gains to come. But before deciding this growth stock is underappreciated, you might want to check out profitability trends (and cash flow)
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. If you are thinking of buying or selling Kingsoft stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
It's nice to see that Kingsoft shareholders have received a total shareholder return of 28% over the last year. That certainly beats the loss of about 0.3% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. Before spending more time on Kingsoft it might be wise to click here to see if insiders have been buying or selling shares.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.