Did Changing Sentiment Drive Palred Technologies's (NSE:PALRED) Share Price Down A Painful 73%?
The main aim of stock picking is to find the market-beating stocks. But in any portfolio, there will be mixed results between individual stocks. So we wouldn't blame long term Palred Technologies Limited (NSE:PALRED) shareholders for doubting their decision to hold, with the stock down 73% over a half decade. And we doubt long term believers are the only worried holders, since the stock price has declined 53% over the last twelve months. The falls have accelerated recently, with the share price down 21% in the last three months.
Check out our latest analysis for Palred Technologies
Palred Technologies isn't a profitable company, so 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. 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 five years, Palred Technologies grew its revenue at 35% per year. That's well above most other pre-profit companies. So on the face of it we're really surprised to see the share price has averaged a fall of 23% each year, in the same time period. It could be that the stock was over-hyped before. While there might be an opportunity here, you'd want to take a close look at the balance sheet strength.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
If you are thinking of buying or selling Palred Technologies stock, you should check out this FREE detailed report on its balance sheet.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Palred Technologies's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. We note that Palred Technologies's TSR, at -29% is higher than its share price return of -73%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
We regret to report that Palred Technologies shareholders are down 53% for the year. Unfortunately, that's worse than the broader market decline of 11%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6.6% per year over five years. We realise that Buffett 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 businesses. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
Of course Palred Technologies may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IN exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
