Further weakness as Wockhardt (NSE:WOCKPHARMA) drops 11% this week, taking five-year losses to 62%

By
Simply Wall St
Published
May 12, 2022
NSEI:WOCKPHARMA
Source: Shutterstock

Statistically speaking, long term investing is a profitable endeavour. But unfortunately, some companies simply don't succeed. For example the Wockhardt Limited (NSE:WOCKPHARMA) share price dropped 65% over five years. That's an unpleasant experience for long term holders. And we doubt long term believers are the only worried holders, since the stock price has declined 62% over the last twelve months. Furthermore, it's down 41% in about a quarter. That's not much fun for holders.

If the past week is anything to go by, investor sentiment for Wockhardt isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for Wockhardt

Wockhardt 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over half a decade Wockhardt reduced its trailing twelve month revenue by 8.2% for each year. While far from catastrophic that is not good. The share price decline of 11% compound, over five years, is understandable given the company is losing money, and revenue is moving in the wrong direction. The chance of imminent investor enthusiasm for this stock seems slimmer than Louise Brooks. Ultimately, it may be worth watching - should revenue pick up, the share price might follow.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

earnings-and-revenue-growth
NSEI:WOCKPHARMA Earnings and Revenue Growth May 12th 2022

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Wockhardt's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that Wockhardt's TSR, which was a 62% drop over the last 5 years, was not as bad as the share price return.

A Different Perspective

While the broader market gained around 13% in the last year, Wockhardt shareholders lost 59%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 10% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Wockhardt better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Wockhardt you should be aware of.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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

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