Further weakness as Sify Technologies (NASDAQ:SIFY) drops 10% this week, taking three-year losses to 76%

It is a pleasure to report that the Sify Technologies Limited (NASDAQ:SIFY) is up 44% in the last quarter. But only the myopic could ignore the astounding decline over three years. In that time the share price has melted like a snowball in the desert, down 76%. So it's about time shareholders saw some gains. The thing to think about is whether the business has really turned around.

Since Sify Technologies has shed US$15m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

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Given that Sify Technologies 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.

In the last three years, Sify Technologies saw its revenue grow by 13% per year, compound. That's a fairly respectable growth rate. So it's hard to believe the share price decline of 21% per year is due to the revenue. More likely, the market was spooked by the cost of that revenue. This is exactly why investors need to diversify - even when a loss making company grows revenue, it can fail to deliver for shareholders.

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

If you are thinking of buying or selling Sify Technologies stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Sify Technologies shareholders are down 45% for the year, but the market itself is up 9.7%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.9% per year over five years. 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. 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. To that end, you should learn about the 2 warning signs we've spotted with Sify Technologies (including 1 which is significant) .

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

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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.