Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Investors in Sadbhav Infrastructure Project Limited (NSE:SADBHIN) have tasted that bitter downside in the last year, as the share price dropped 37%. That's disappointing when you consider the market returned 1.9%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 20% in three years. On the other hand the share price has bounced 5.9% over the last week. The buoyant market could have helped drive the share price pop, since stocks are up 4.1% in the same period.
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Sadbhav Infrastructure Project 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last year Sadbhav Infrastructure Project saw its revenue grow by 80%. That's a strong result which is better than most other loss making companies. The share price drop of 37% over twelve months would be considered disappointing by many, so you might argue the company is getting little credit for its impressive revenue growth. On the bright side, if this company is moving profits in the right direction, top-line growth like that could be an opportunity. Our brains have evolved to think in linear fashion, so there's value in learning to recognize exponential growth. We are, in some ways, simply the wisest of the monkeys.
Depicted in the graphic below, you'll see revenue and earnings over time. If you want more detail, you can click on the chart itself.
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. If you are thinking of buying or selling Sadbhav Infrastructure Project stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
The last twelve months weren't great for Sadbhav Infrastructure Project shares, which cost holders 37%, including dividends, while the market was up about 1.9%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Shareholders have lost 6.8% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. Although Warren Buffett famously said he likes to 'buy when there is blood on the streets', he also focusses on high quality stocks with solid prospects. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
But note: Sadbhav Infrastructure Project may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.