If You Had Bought Reliance Communications (NSE:RCOM) Shares A Year Ago You'd Have Earned 156% Returns

Reliance Communications Limited (NSE:RCOM) shareholders have seen the share price descend 15% over the month. On the other hand, over the last twelve months the stock has delivered rather impressive returns. Indeed, the share price is up an impressive 156% in that time. So we think most shareholders won't be too upset about the recent fall. Investors should be wondering whether the business itself has the fundamental value required to continue to drive gains.

See our latest analysis for Reliance Communications

Given that Reliance Communications didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

Reliance Communications actually shrunk its revenue over the last year, with a reduction of 71%. So we would not have expected the share price to rise 156%. This is a good example of how buyers can push up prices even before the fundamental metrics show much growth. It's quite likely the revenue fall was already priced in, anyway.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

This free interactive report on Reliance Communications' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

We're pleased to report that Reliance Communications shareholders have received a total shareholder return of 156% over one year. There's no doubt those recent returns are much better than the TSR loss of 15% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand Reliance Communications better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Reliance Communications (at least 1 which makes us a bit uncomfortable) , and understanding them should be part of your investment process.

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 IN exchanges.

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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.
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