It’s nice to see the Ujjivan Financial Services Limited (NSE: UJJIVAN) stock price is up 15% in one week. But that doesn’t change the fact that returns over the past half-decade have been disappointing. Meanwhile, the stock price has been a brutal shock for holders, who find themselves down 68% after a long stretch. Some might say the recent rebound is to be expected after such a bad drop. We would err on the side of caution given the long-term underperformance.
On a more encouraging note, the company has added ₹2.0 billion to its market capitalization in the last 7 days alone, so let’s see if we can work out what caused the five-year loss for shareholders.
See our latest analysis for Ujjivan Financial Services
Since Ujjivan Financial Services has not made a profit in the past twelve months, we will focus on revenue growth to get a quick overview of its business development. When a business is not making a profit, you generally expect to see good revenue growth. Indeed, it is difficult to be sure that a business will be sustainable if revenue growth is negligible and it never makes a profit.
Over five years, Ujjivan Financial Services has increased its turnover by 18% per year. That’s better than most loss-making companies. Unfortunately for shareholders, the share price has fallen 11% per year – disappointing given the growth. This could mean that high expectations have been tempered, perhaps because investors are looking to the bottom line. Given the growth in revenue, we would consider the stock to be quite an attractive prospect if the company has a clear path to profitability.
You can see how earnings and income have changed over time below (find out the exact values by clicking on the image).
Balance sheet strength is critical. It might be interesting to take a look at our free report on the evolution of its financial situation over time.
A different perspective
Ujjivan Financial Services shareholders are down 43% for the year, but the market itself is up 26%. Even good stock prices sometimes drop, but we want to see improvements in a company’s fundamentals before we get too interested. Unfortunately, last year’s performance may point to unresolved challenges, given that it was worse than the 11% annualized loss over the past half-decade. We realize that Baron Rothschild said investors should “buy when there’s blood in the streets”, but we caution that investors must first make sure they are buying a high quality company. If you want to do more detailed research on Ujjivan Financial Services, you might want to check whether insiders have bought or sold shares of the company.
For those who like to find winning investments this free list of growing companies with recent insider buying, might be just the ticket.
Please note that the market returns quoted in this article reflect the average market-weighted returns of stocks currently trading on IN exchanges.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.