Strong week for Pak Tak International (HKG:2668) shareholders doesn't alleviate pain of one-year loss

This month, we saw the Pak Tak International Limited (HKG:2668) up an impressive 105%. But that hardly compensates for the shocking decline over the last twelve months. Specifically, the stock price nose-dived 79% in that time. It's not uncommon to see a bounce after a drop like that. The real question is whether the company can turn around its fortunes.

Although the past week has been more reassuring for shareholders, they're still in the red over the last year, so let's see if the underlying business has been responsible for the decline.

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Given that Pak Tak International didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually desire strong 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.

In the last twelve months, Pak Tak International increased its revenue by 58%. That's well above most other pre-profit companies. So on the face of it we're really surprised to see the share price down 79% over twelve months. There's clearly something unusual going on here such as an acquisition that hasn't delivered expected profits. What is clear is that the market is not judging the company on its revenue growth right now. Of course, markets do over-react so share price drop may be too harsh.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Take a more thorough look at Pak Tak International's financial health with this free report on its balance sheet.

A Different Perspective

While the broader market gained around 40% in the last year, Pak Tak International shareholders lost 79%. 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 9% 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. It's always interesting to track share price performance over the longer term. But to understand Pak Tak International better, we need to consider many other factors. Take risks, for example - Pak Tak International has 5 warning signs (and 3 which are concerning) we think you should know about.

But note: Pak Tak International may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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