Kandi Technologies Group, Inc. (NASDAQ:KNDI) shareholders should be happy to see the share price up 12% in the last month. But spare a thought for the long term holders, who have held the stock as it bled value over the last five years. In fact, the share price has tumbled down a mountain to land 71% lower after that period. The recent bounce might mean the long decline is over, but we are not confident. The important question is if the business itself justifies a higher share price in the long term.
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.
Because Kandi Technologies 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. 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.
Over five years, Kandi Technologies Group grew its revenue at 0.5% per year. That's not a very high growth rate considering it doesn't make profits. Nonetheless, it's fair to say the rapidly declining share price (down 11%, compound, over five years) suggests the market is very disappointed with this level of growth. While we're definitely wary of the stock, after that kind of performance, it could be an over-reaction. We'd recommend focussing any further research on the likelihood of profitability in the foreseeable future, given the muted revenue growth.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. You can see what analysts are predicting for Kandi Technologies Group in this interactive graph of future profit estimates.
A Different Perspective
While the broader market lost about 25% in the twelve months, Kandi Technologies Group shareholders did even worse, losing 47%. 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 11% 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. It's always interesting to track share price performance over the longer term. But to understand Kandi Technologies Group better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Kandi Technologies Group you should be aware of.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
