This week we saw the Estoril Sol, SGPS, S.A. (ELI:ESON) share price climb by 13%. But that doesn't help the fact that the three year return is less impressive. In fact, the share price is down 35% in the last three years, falling well short of the market return.
While the stock has risen 13% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.
Given that Estoril Sol SGPS 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. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Over the last three years, Estoril Sol SGPS' revenue dropped 20% per year. That means its revenue trend is very weak compared to other loss making companies. With revenue in decline, the share price decline of 11% per year is hardly undeserved. The key question now is whether the company has the capacity to fund itself to profitability, without more cash. Of course, it is possible for businesses to bounce back from a revenue drop - but we'd want to see that before getting interested.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Take a more thorough look at Estoril Sol SGPS' financial health with this free report on its balance sheet.
What about the Total Shareholder Return (TSR)?
We've already covered Estoril Sol SGPS' share price action, but we should also mention its total shareholder return (TSR). 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. Estoril Sol SGPS' TSR of was a loss of 32% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
Over the last year Estoril Sol SGPS shareholders have received a TSR of 3.4%. Unfortunately this falls short of the market return of around 35%. The silver lining is that the recent rise is far preferable to the annual loss of 10% that shareholders have suffered over the last three years. We hope the turnaround in fortunes continues. 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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Estoril Sol SGPS (of which 1 is potentially serious!) you should know about.
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 PT exchanges.
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.
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