While shareholders of Balkrishna Paper Mills (NSE:BALKRISHNA) are in the black over 1 year, those who bought a week ago aren't so fortunate

Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. That downside risk was realized by Balkrishna Paper Mills Limited (NSE:BALKRISHNA) shareholders over the last year, as the share price declined 14%. That's well below the market return of 42%. Longer term investors have fared much better, since the share price is up 9.6% in three years. The last week also saw the share price slip down another 15%.

After losing 15% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

Check out our latest analysis for Balkrishna Paper Mills

With just ₹46,519,000 worth of revenue in twelve months, we don't think the market considers Balkrishna Paper Mills to have proven its business plan. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Balkrishna Paper Mills will significantly advance the business plan before too long.

As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. There was already a significant chance that they would need more money for business development, and indeed they recently put themselves at the mercy of capital markets and raised equity. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt.

Balkrishna Paper Mills had liabilities exceeding cash when it last reported, according to our data. That made it extremely high risk, in our view. But since the share price has dived 14% in the last year , it looks like some investors think it's time to abandon ship, so to speak, even though the cash reserves look a little better with the capital raising. You can see in the image below, how Balkrishna Paper Mills' cash levels have changed over time (click to see the values).

It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. Would it bother you if insiders were selling the stock? It would bother me, that's for sure. You can click here to see if there are insiders selling.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Balkrishna Paper Mills' total shareholder return (TSR) and its share price change, which we've covered above. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Balkrishna Paper Mills hasn't been paying dividends, but its TSR of 25% exceeds its share price return of -14%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

Balkrishna Paper Mills provided a TSR of 25% over the last twelve months. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 11% per year over five year. This suggests the company might be improving over time. 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. Consider risks, for instance. Every company has them, and we've spotted 5 warning signs for Balkrishna Paper Mills you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.