Further weakness as Dhani Services (NSE:DHANI) drops 11% this week, taking five-year losses to 59%

Statistically speaking, long term investing is a profitable endeavour. But that doesn't mean long term investors can avoid big losses. Zooming in on an example, the Dhani Services Limited (NSE:DHANI) share price dropped 60% in the last half decade. That's an unpleasant experience for long term holders. The falls have accelerated recently, with the share price down 38% in the last three months. However, one could argue that the price has been influenced by the general market, which is down 16% in the same timeframe.

Since Dhani Services has shed ₹4.3b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out our latest analysis for Dhani Services

Given that Dhani Services 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 would hope for good top-line growth to make up for the lack of earnings.

Over half a decade Dhani Services reduced its trailing twelve month revenue by 43% for each year. That's definitely a weaker result than most pre-profit companies report. It seems appropriate, then, that the share price slid about 10% annually during that time. It's fair to say most investors don't like to invest in loss making companies with falling revenue. You'd want to research this company pretty thoroughly before buying, it looks a bit too risky for us.

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

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

A Different Perspective

We're pleased to report that Dhani Services shareholders have received a total shareholder return of 59% over one year. There's no doubt those recent returns are much better than the TSR loss of 10% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. It's always interesting to track share price performance over the longer term. But to understand Dhani Services better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Dhani Services (of which 1 can't be ignored!) you should know about.

Of course Dhani Services 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.