Long term investing is the way to go, but that doesn’t mean you should hold every stock forever. We don’t wish catastrophic capital loss on anyone. Anyone who held GTL Infrastructure Limited (NSE:GTLINFRA) for five years would be nursing their metaphorical wounds since the share price dropped 80% in that time. And it’s not just long term holders hurting, because the stock is down 64% in the last year. Furthermore, it’s down 41% 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 hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don’t have to lose the lesson.
Because GTL Infrastructure is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn’t make profits, we’d generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last half decade, GTL Infrastructure saw its revenue increase by 28% per year. That’s better than most loss-making companies. So it’s not at all clear to us why the share price sunk 28% throughout that time. You’d have to assume the market is worried that profits won’t come soon enough. We’d recommend carefully checking for indications of future growth – and balance sheet threats – before considering a purchase.
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
We regret to report that GTL Infrastructure shareholders are down 64% for the year. Unfortunately, that’s worse than the broader market decline of 13%. Having said that, it’s inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 28% per year over five years. We realise that Buffett 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 businesses. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IN exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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. Thank you for reading.