New Zealand King Salmon Investments (NZSE:NZK) investors from three years ago are still down 76%, even after an 18% gain last week

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This week we saw the New Zealand King Salmon Investments Limited (NZSE:NZK) stock price climbs 18%. But that doesn’t change the fact that returns over the past three years have been stomach-churning. Namely, the stock price fell 88% at that time. So it’s nice to see a bit of improvement. Of course, the real question is whether the company can sustain a turnaround. We really hope that anyone weathering this price drop has a diversified portfolio. Even when you lose money, you don’t have to lose the lesson.

Although last week was more reassuring for shareholders, they are still in the red over the past three years, so let’s see if the underlying activity was responsible for the decline.

Our analysis indicates that The NZK is potentially overvalued!

New Zealand King Salmon Investments has not been profitable for the last twelve months, we are unlikely to see a strong correlation between its share price and earnings per share (EPS). Income is arguably our second best option. Shareholders of unprofitable companies generally expect strong revenue growth. Indeed, rapid revenue growth can be easily extrapolated to predict profits, often of considerable size.

Over three years, New Zealand King Salmon Investments grew its revenue by 2.7% per year. It’s not a very high growth rate since it’s not making a profit. But the stock price drop of 23% per year seems a bit harsh! We usually don’t try to “catch the falling knife.” Before considering a purchase, take a look at the losses the company is racking up.

The company’s revenues and profits (over time) are shown in the image below (click to see exact figures).

NZSE: NZK Earnings and Revenue Growth November 12, 2022

If you are considering buying or selling shares of New Zealand King Salmon Investments, you should check out this FREE detailed report on its balance sheet.

What about total shareholder return (TSR)?

Investors should note that there is a difference between the total shareholder return (TSR) of New Zealand King Salmon Investments and the change in its share price, which we have discussed above. TSR is a calculation of return that takes into account the value of cash dividends (assuming any dividends received have been reinvested) and the calculated value of all discounted capital raisings and spinoffs. Dividends have been really good for the shareholders of New Zealand King Salmon Investments, and this cash payout explains why its total shareholder loss of 76%, over the past 3 years, isn’t as bad as the yield of the share price.

A different perspective

While the broader market lost around 13% in the twelve months, New Zealand shareholders of King Salmon Investments fared even worse, losing 63%. However, it could simply be that the stock price was impacted by greater market jitters. It might be worth keeping an eye on the fundamentals, in case there is a good opportunity. Unfortunately, last year’s performance may point to unresolved challenges, given that it was worse than the 12% annualized loss over the past half-decade. Generally speaking, long-term stock price weakness can be a bad sign, though contrarian investors might want to hunt for the stock in hopes of a turnaround. I find it very interesting to look at stock price over the long term as a proxy for company performance. But to really get insight, we also need to consider other information. For example, we have identified 3 warning signs for King Salmon Investments in New Zealand (2 are a bit of a concern) that you should be aware of.

If you’d rather check out another company – one with potentially superior finances – then don’t miss this free list of companies that have proven that they can increase their profits.

Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently trading on New Zealand stock exchanges.

Valuation is complex, but we help make it simple.

Find out if King Salmon Investments in New Zealand is potentially overvalued or undervalued by viewing our full analysis, which includes fair value estimates, risks and warnings, dividends, insider trading and financial health.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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