Investors who have held TruCap Finance (NSE:TRU) over the last year have watched its earnings decline along with their investment

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by TruCap Finance Limited (NSE:TRU) shareholders over the last year, as the share price declined 23%. That falls noticeably short of the market return of around 20%. Because TruCap Finance hasn't been listed for many years, the market is still learning about how the business performs.

The recent uptick of 10% could be a positive sign of things to come, so let's take a look at historical fundamentals.

View our latest analysis for TruCap Finance

Given that TruCap Finance 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.

TruCap Finance grew its revenue by 51% over the last year. That's a strong result which is better than most other loss making companies. The share price drop of 23% over twelve months would be considered disappointing by many, so you might argue the company is getting little credit for its impressive revenue growth. On the bright side, if this company is moving profits in the right direction, top-line growth like that could be an opportunity. Our monkey brains haven't evolved to think exponentially, so humans do tend to underestimate companies that have exponential growth.

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 TruCap Finance stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While TruCap Finance shareholders are down 23% for the year (even including dividends), the market itself is up 20%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. It's great to see a nice little 4.7% rebound in the last three months. This could just be a bounce because the selling was too aggressive, but fingers crossed it's the start of a new trend. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 6 warning signs with TruCap Finance (at least 3 which shouldn't be ignored) , and understanding them should be part of your investment process.

We will like TruCap Finance better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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

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

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.