Should Lemon Tree Hotels (NSE:LEMONTREE) Be Disappointed With Their 11% Profit?

We believe investing is smart because history shows that stock markets go higher in the long term. But if you choose that path, you're going to buy some stocks that fall short of the market. Unfortunately for shareholders, while the Lemon Tree Hotels Limited (NSE:LEMONTREE) share price is up 11% in the last year, that falls short of the market return. We'll need to follow Lemon Tree Hotels for a while to get a better sense of its share price trend, since it hasn't been listed for particularly long.

See our latest analysis for Lemon Tree Hotels

Given that Lemon Tree Hotels didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

In the last year Lemon Tree Hotels saw its revenue shrink by 48%. Given the revenue reduction the modest 11% share price rise over the year seems pretty decent. Generally we're pretty unenthusiastic about loss making stocks that are not growing revenue.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Lemon Tree Hotels is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think Lemon Tree Hotels will earn in the future (free analyst consensus estimates)

A Different Perspective

We're happy to report that Lemon Tree Hotels are up 11% over the year. While it's always nice to make a profit on the stock market, we do note that the TSR was no better than the broader market return of about 60%. The last three months haven't been great for shareholder returns, since the share price has trailed the market by 22% in the last three months. But a weak quarter certainly doesn't diminish the longer-term achievements of the business. 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 instance, we've identified 2 warning signs for Lemon Tree Hotels that you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IN exchanges.

If you’re looking to trade Lemon Tree Hotels, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.