As every investor would know, not every swing hits the sweet spot. But really big losses can really drag down an overall portfolio. So consider, for a moment, the misfortune of Mindteck (India) Limited (NSE:MINDTECK) investors who have held the stock for three years as it declined a whopping 84%. That’d be enough to cause even the strongest minds some disquiet. And more recent buyers are having a tough time too, with a drop of 67% in the last year. Shareholders have had an even rougher run lately, with the share price down 53% in the last 90 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.
Mindteck (India) isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong 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 three years Mindteck (India) saw its revenue shrink by 6.2% per year. That is not a good result. Having said that the 46% annualized share price decline highlights the risk of investing in unprofitable companies. This business clearly needs to grow revenues if it is to perform as investors hope. Don’t let a share price decline ruin your calm. You make better decisions when you’re calm.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
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
Mindteck (India) shareholders are down 66% for the year (even including dividends) , falling short of the market return. Meanwhile, the broader market slid about 14%, likely weighing on the stock. The three-year loss of 45% per year isn’t as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Mindteck (India) is showing 5 warning signs in our investment analysis , and 2 of those are a bit unpleasant…
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IN exchanges.
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