Long term investing is the way to go, but that doesn’t mean you should hold every stock forever. We really hate to see fellow investors lose their hard-earned money. Spare a thought for those who held Rolta India Limited (NSE:ROLTA) for five whole years – as the share price tanked 96%. And it’s not just long term holders hurting, because the stock is down 43% in the last year. It’s up 1.1% in the last seven days.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don’t have to lose the lesson.
Rolta India 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over half a decade Rolta India reduced its trailing twelve month revenue by 14% for each year. That puts it in an unattractive cohort, to put it mildly. So it’s not altogether surprising to see the share price down 47% per year in the same time period. We don’t think this is a particularly promising picture. Ironically, that behavior could create an opportunity for the contrarian investor – but only if there are good reasons to predict a brighter future.
The graphic below depicts how earnings and revenue have changed over time (unveil 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
Rolta India shareholders are down 43% for the year, but the market itself is up 5.8%. 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. However, the loss over the last year isn’t as bad as the 46% per annum loss investors have suffered over the last half decade. We’d need to see some sustained improvements in the key metrics before we could muster much enthusiasm. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
We will like Rolta India better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IN exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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