Is IDFC's (NSE:IDFC) 177% Share Price Increase Well Justified?

By
Simply Wall St
Published
June 18, 2021
NSEI:IDFC

Unless you borrow money to invest, the potential losses are limited. But if you pick the right stock, you can make a lot more than 100%. Take, for example IDFC Limited (NSE:IDFC). Its share price is already up an impressive 177% in the last twelve months. Unfortunately, though, the stock has dropped 5.1% over a week. This could be related to the recent financial results, released recently -- you can catch up on the most recent data by reading our company report. However, the stock hasn't done so well in the longer term, with the stock only up 11% in three years.

View our latest analysis for IDFC

IDFC wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

IDFC grew its revenue by 24% last year. We respect that sort of growth, no doubt. The revenue growth is decent but the share price had an even better year, gaining 177%. Given that the business has made good progress on the top line, it would be worth taking a look at its path to profitability. But investors need to be wary of how the 'fear of missing out' could influence them to buy without doing thorough research.

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:IDFC Earnings and Revenue Growth June 19th 2021

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

A Different Perspective

It's nice to see that IDFC shareholders have received a total shareholder return of 177% over the last year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 5% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. To that end, you should learn about the 2 warning signs we've spotted with IDFC (including 1 which is concerning) .

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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

Promoted
When trading IDFC or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.


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.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.


Simply Wall St character - Warren

Simply Wall St

Simply Wall St is a financial technology startup focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of equity analysts with a public, market-beating track record.