K3 Business Technology Group (LON:KBT) investors are sitting on a loss of 38% if they invested five years ago

For many, the main point of investing is to generate higher returns than the overall market. But even the best stock picker will only win with some selections. At this point some shareholders may be questioning their investment in K3 Business Technology Group plc (LON:KBT), since the last five years saw the share price fall 39%. Shareholders have had an even rougher run lately, with the share price down 12% in the last 90 days. But this could be related to the weak market, which is down 5.2% in the same period.

With that in mind, it’s worth seeing if the company’s underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

Check out our latest analysis for K3 Business Technology Group

Because K3 Business Technology Group made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

Over half a decade K3 Business Technology Group reduced its trailing twelve month revenue by 17% for each year. That’s definitely a weaker result than most pre-profit companies report. On the face of it we’d posit the share price fall of 7% compound, over five years is well justified by the fundamental deterioration. We doubt many shareholders are delighted with this share price performance. Risk averse investors probably wouldn’t like this one much.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

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.

A Different Perspective

K3 Business Technology Group shareholders are down 14% for the year, but the market itself is up 1.4%. 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. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 7% over the last half decade. We realise that Baron Rothschild has said investors should “buy when there is blood on the streets”, but we caution that investors should first be sure they are buying a high quality business. 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. Like risks, for instance. Every company has them, and we’ve spotted 2 warning signs for K3 Business Technology Group (of which 1 can’t be ignored!) you should know about.

Story continues

Of course K3 Business Technology Group may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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