Statistically speaking, long term investing is a profitable endeavour. But unfortunately, some companies simply don’t succeed. Zooming in on an example, the Jindal Cotex Limited (NSE:JINDCOT) share price dropped 69% in the last half decade. That’s not a lot of fun for true believers. And some of the more recent buyers are probably worried, too, with the stock falling 46% in the last year. On top of that, the share price has dropped a further 24% in a month.
Because Jindal Cotex is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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 five years Jindal Cotex saw its revenue shrink by 38% per year. That puts it in an unattractive cohort, to put it mildly. Arguably, the market has responded appropriately to this business performance by sending the share price down 21% (annualized) in the same time period. It’s fair to say most investors don’t like to invest in loss making companies with falling revenue. This looks like a really risky stock to buy, at a glance.
Depicted in the graphic below, you’ll see revenue and earnings over time. If you want more detail, you can click on the chart itself.
It’s probably worth noting that the CEO is paid less than the median at similar sized companies. It’s always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of Jindal Cotex’s earnings, revenue and cash flow.
A Different Perspective
We regret to report that Jindal Cotex shareholders are down 46% for the year. Unfortunately, that’s worse than the broader market decline of 6.5%. Having said that, it’s inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 21% over the last half decade. 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. You could get a better understanding of Jindal Cotex’s growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
But note: Jindal Cotex 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.
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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.