Investors bid Kothari Products (NSE:KOTHARIPRO) up ₹453m despite increasing losses YoY, taking five-year CAGR to 29%

While Kothari Products Limited (NSE:KOTHARIPRO) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 14% in the last quarter. But that doesn't change the fact that shareholders have received really good returns over the last five years. It's fair to say most would be happy with 261% the gain in that time. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. Of course, that doesn't necessarily mean it's cheap now.

Since it's been a strong week for Kothari Products shareholders, let's have a look at trend of the longer term fundamentals.

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Kothari Products 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 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.

Over the last half decade Kothari Products' revenue has actually been trending down at about 32% per year. On the other hand, the share price done the opposite, gaining 29%, compound, each year. It's a good reminder that expectations about the future, not the past history, always impact share prices. Still, this situation makes us a little wary of the stock.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

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

A Different Perspective

It's good to see that Kothari Products has rewarded shareholders with a total shareholder return of 20% in the last twelve months. Having said that, the five-year TSR of 29% a year, is even better. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. 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. Take risks, for example - Kothari Products has 2 warning signs (and 1 which can't be ignored) we think you should know about.

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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.