Speciality Restaurants Limited (NSE:SPECIALITY) shareholders should be happy to see the share price up 21% in the last quarter. But if you look at the last five years the returns have not been good. After all, the share price is down 28% in that time, significantly under-performing the market.
Given that Speciality Restaurants 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. 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 does expect good top-line growth.
In the last half decade, Speciality Restaurants saw its revenue increase by 6.8% per year. That’s a pretty good rate for a long time period. Shareholders have seen the share price fall at 6.3% per year, for five years: a poor performance. Clearly, the expectations from back then have not been satisfied. The lesson is that if you buy shares in a money losing company you could end up losing money.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
This free interactive report on Speciality Restaurants’s balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Speciality Restaurants shareholders are down 20% for the year, but the market itself is up 3.4%. 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. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 6.1% 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 might want to assess this data-rich visualization of its earnings, revenue and cash flow.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.
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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.