Shareholders have faith in loss-making HMT (NSE:HMT) as stock climbs 15% in past week, taking five-year gain to 333%

For many, the main point of investing in the stock market is to achieve spectacular returns. While the best companies are hard to find, but they can generate massive returns over long periods. Just think about the savvy investors who held HMT Limited (NSE:HMT) shares for the last five years, while they gained 333%. This just goes to show the value creation that some businesses can achieve. It's also good to see the share price up 52% over the last quarter.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

View our latest analysis for HMT

Because HMT made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually desire strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

In the last 5 years HMT saw its revenue shrink by 7.9% per year. So it's pretty surprising to see that the share price is up 34% per year. There can be no doubt this kind of decoupling of revenue growth and share price growth is unusual to see in loss making companies. I think it's fair to say there is probably a fair bit of excitement in the price.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

This free interactive report on HMT's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

We're pleased to report that HMT shareholders have received a total shareholder return of 131% over one year. That's better than the annualised return of 34% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - HMT has 2 warning signs we think you should be aware of.

We will like HMT better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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 Indian exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com