Stock Analysis

Reflecting on EIH's (NSE:EIHOTEL) Share Price Returns Over The Last Year

NSEI:EIHOTEL
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EIH Limited (NSE:EIHOTEL) shareholders should be happy to see the share price up 20% in the last quarter. But that isn't much consolation to those who have suffered through the declines of the last year. During that time the share price has sank like a stone, descending 57%. Some might say the recent bounce is to be expected after such a bad drop. It may be that the fall was an overreaction.

Check out our latest analysis for EIH

Given that EIH only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In just one year EIH saw its revenue fall by 26%. That's not what investors generally want to see. In the absence of profits, it's not unreasonable that the share price fell 57%. Having said that, if growth is coming in the future, the stock may have better days ahead. We have a natural aversion to companies that are losing money and shrinking revenue. But perhaps that is being too careful.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
NSEI:EIHOTEL Earnings and Revenue Growth October 22nd 2020

If you are thinking of buying or selling EIH stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While the broader market gained around 3.7% in the last year, EIH shareholders lost 56%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 3 warning signs for EIH (1 can't be ignored!) that you should be aware of before investing here.

But note: EIH 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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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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