Investors ignore increasing losses at Sono SquareLtd (KOSDAQ:007720) as stock jumps 10% this past week

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But if you pick the right individual stocks, you could make more than that. For example, the Sono Square Co.,Ltd. (KOSDAQ:007720) share price is up 66% in the last 1 year, clearly besting the market return of around 2.2% (not including dividends). That's a solid performance by our standards! In contrast, the longer term returns are negative, since the share price is 13% lower than it was three years ago.

The past week has proven to be lucrative for Sono SquareLtd investors, so let's see if fundamentals drove the company's one-year performance.

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Sono SquareLtd wasn't profitable in the last twelve months, 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Sono SquareLtd actually shrunk its revenue over the last year, with a reduction of 9.2%. Despite the lack of revenue growth, the stock has returned a solid 66% the last twelve months. We can correlate the share price rise with revenue or profit growth, but it seems the market had previously expected weaker results, and sentiment around the stock is improving.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

It's good to see that Sono SquareLtd has rewarded shareholders with a total shareholder return of 66% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 4% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Sono SquareLtd is showing 1 warning sign in our investment analysis , you should know about...

Of course Sono SquareLtd 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 South Korean 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.