Seoul Auction (KOSDAQ:063170) adds ₩14b to market cap in the past 7 days, though investors from three years ago are still down 54%

This week we saw the Seoul Auction Co. Ltd. (KOSDAQ:063170) share price climb by 12%. But that is small recompense for the exasperating returns over three years. In that time, the share price dropped 54%. So the improvement may be a real relief to some. The rise has some hopeful, but turnarounds are often precarious.

On a more encouraging note the company has added ₩14b to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

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Seoul Auction 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 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 three years Seoul Auction saw its revenue shrink by 43% per year. That means its revenue trend is very weak compared to other loss making companies. Arguably, the market has responded appropriately to this business performance by sending the share price down 15% (annualized) in the same time period. Bagholders or 'baggies' are people who buy more of a stock as the price collapses. They are then left 'holding the bag' if the shares turn out to be worthless. It could be a while before the company repays long suffering shareholders with share price gains.

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

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

Seoul Auction provided a TSR of 9.0% over the last twelve months. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 1.7% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. It's always interesting to track share price performance over the longer term. But to understand Seoul Auction better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with Seoul Auction (including 2 which can't be ignored) .

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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.