When you buy shares in a company, there is always a risk that the price drops to zero. But if you pick the right business to buy shares in, you can make more than you can lose. For example, the Jain Irrigation Systems Limited (NSE:JISLJALEQS) share price has soared 252% return in just a single year. In contrast, the stock has fallen 9.3% in the last 30 days. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report. Unfortunately the longer term returns are not so good, with the stock falling 83% in the last three years.
Jain Irrigation Systems 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. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last year Jain Irrigation Systems saw its revenue shrink by 20%. So we would not have expected the share price to rise 252%. This is a good example of how buyers can push up prices even before the fundamental metrics show much growth. Of course, it could be that the market expected this revenue drop.
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
We're pleased to report that Jain Irrigation Systems shareholders have received a total shareholder return of 252% over one year. There's no doubt those recent returns are much better than the TSR loss of 11% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. It's always interesting to track share price performance over the longer term. But to understand Jain Irrigation Systems better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Jain Irrigation Systems .
Of course Jain Irrigation Systems may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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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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. 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.
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