Even the best investor on earth makes unsuccessful investments. But it should be a priority to avoid stomach churning catastrophes, wherever possible. So spare a thought for the long term shareholders of Kingsoft Cloud Holdings Limited (NASDAQ:KC); the share price is down a whopping 86% in the last twelve months. That’d be enough to make even the strongest stomachs churn. We wouldn’t rush to judgement on Kingsoft Cloud Holdings because we don’t have a long term history to look at. Furthermore, it’s down 30% in about a quarter. That’s not much fun for holders. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report. We really feel for shareholders in this scenario. It’s a good reminder of the importance of diversification, and it’s worth keeping in mind there’s more to life than money, anyway.
If the past week is anything to go by, investor sentiment for Kingsoft Cloud Holdings isn’t positive, so let’s see if there’s a mismatch between fundamentals and the share price.
Our analysis indicates that KC is potentially overvalued!
Kingsoft Cloud Holdings isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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.
Kingsoft Cloud Holdings grew its revenue by 4.6% over the last year. That’s not a very high growth rate considering it doesn’t make profits. Nonetheless, it’s fair to say the 86% share price implosion is unexpected.. Clearly the market was expecting better, and this may blow out projections of profitability. If and only if this company is still likely to succeed, just a little slower, this could be a good opportunity.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
This free interactive report on Kingsoft Cloud Holdings’ balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
We doubt Kingsoft Cloud Holdings shareholders are happy with the loss of 86% over twelve months. That falls short of the market, which lost 17%. That’s disappointing, but it’s worth keeping in mind that the market-wide selling wouldn’t have helped. With the stock down 30% over the last three months, the market doesn’t seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. It’s always interesting to track share price performance over the longer term. But to understand Kingsoft Cloud Holdings better, we need to consider many other factors. Case in point: We’ve spotted 2 warning signs for Kingsoft Cloud Holdings you should be aware of, and 1 of them can’t be ignored.
But note: Kingsoft Cloud Holdings 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 US exchanges.
Valuation is complex, but we’re helping make it simple.
Find out whether Kingsoft Cloud Holdings is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
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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.
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