Shareholders in Spencer's Retail (NSE:SPENCERS) have lost 35%, as stock drops 10% this past week

Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. That downside risk was realized by Spencer's Retail Limited (NSE:SPENCERS) shareholders over the last year, as the share price declined 35%. That's disappointing when you consider the market declined 0.3%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 27% in three years. It's down 36% in about a quarter. However, one could argue that the price has been influenced by the general market, which is down 15% in the same timeframe.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

Check out our latest analysis for Spencer's Retail

Because Spencer's Retail 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. 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 just one year Spencer's Retail saw its revenue fall by 9.0%. That's not what investors generally want to see. The stock price has languished lately, falling 35% in a year. What would you expect when revenue is falling, and it doesn't make a profit? It's hard to escape the conclusion that buyers must envision either growth down the track, cost cutting, or both.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

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 regret to report that Spencer's Retail shareholders are down 35% for the year. Unfortunately, that's worse than the broader market decline of 0.3%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.6% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Spencer's Retail better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with Spencer's Retail (including 2 which are potentially serious) .

Of course Spencer's Retail 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 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.