In order to justify the effort of selecting individual stocks, it’s worth striving to beat the returns from a market index fund. But the main game is to find enough winners to more than offset the losers So we wouldn’t blame long term Garden Silk Mills Limited (NSE:GARDENSILK) shareholders for doubting their decision to hold, with the stock down 50% over a half decade. We also note that the stock has performed poorly over the last year, with the share price down 42%. The falls have accelerated recently, with the share price down 16% in the last three months.
Because Garden Silk Mills is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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.
Over five years, Garden Silk Mills grew its revenue at 1.7% per year. That’s not a very high growth rate considering it doesn’t make profits. Given this fairly low revenue growth (and lack of profits), it’s not particularly surprising to see the stock down 13% (annualized) in the same time frame. The key question is whether the company can make it to profitability, and beyond, without trouble. Shareholders will want the company to approach profitability if it can’t grow revenue any faster.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
Take a more thorough look at Garden Silk Mills’s financial health with this free report on its balance sheet.
A Different Perspective
Garden Silk Mills shareholders are down 42% for the year, but the market itself is up 1.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 13% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
But note: Garden Silk Mills may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IN exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.