Strong week for Dhani Services (NSE:DHANI) shareholders doesn't alleviate pain of five-year loss

While it may not be enough for some shareholders, we think it is good to see the Dhani Services Limited (NSE:DHANI) share price up 13% in a single quarter. But don't envy holders -- looking back over 5 years the returns have been really bad. The share price has failed to impress anyone , down a sizable 66% during that time. So we're hesitant to put much weight behind the short term increase. Of course, this could be the start of a turnaround.

The recent uptick of 13% could be a positive sign of things to come, so let's take a look at historical fundamentals.

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Given that Dhani Services 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. It would be hard to believe in a more profitable future without growing revenues.

In the last five years Dhani Services saw its revenue shrink by 37% per year. That puts it in an unattractive cohort, to put it mildly. Arguably, the market has responded appropriately to this business performance by sending the share price down 11% (annualized) in the same time period. 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 company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

We're pleased to report that Dhani Services shareholders have received a total shareholder return of 10% over one year. There's no doubt those recent returns are much better than the TSR loss of 11% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 1 warning sign for Dhani Services that you should be aware of.

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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.