Rane (Madras) (NSE:RML) shareholders are still up 153% over 5 years despite pulling back 11% in the past week

While Rane (Madras) Limited (NSE:RML) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 27% in the last quarter. But in stark contrast, the returns over the last half decade have impressed. It's fair to say most would be happy with 153% the gain in that time. To some, the recent pullback wouldn't be surprising after such a fast rise. Only time will tell if there is still too much optimism currently reflected in the share price.

Although Rane (Madras) has shed ₹1.6b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

View our latest analysis for Rane (Madras)

While Rane (Madras) made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.

In the last 5 years Rane (Madras) saw its revenue grow at 15% per year. That's well above most pre-profit companies. So it's not entirely surprising that the share price reflected this performance by increasing at a rate of 20% per year, in that time. This suggests the market has well and truly recognized the progress the business has made. Rane (Madras) seems like a high growth stock - so growth investors might want to add it to their watchlist.

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

Rane (Madras) shareholders are up 0.9% for the year. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 20% per year for five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. It's always interesting to track share price performance over the longer term. But to understand Rane (Madras) better, we need to consider many other factors. Take risks, for example - Rane (Madras) has 2 warning signs (and 1 which is concerning) we think you should know about.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Indian 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.