Madras Fertilizers (NSE:MADRASFERT) Shareholders Booked A 41% Gain In The Last Three Years

By buying an index fund, investors can approximate the average market return. But if you pick the right individual stocks, you could make more than that. Just take a look at Madras Fertilizers Limited (NSE:MADRASFERT), which is up 41%, over three years, soundly beating the market return of 12% (not including dividends).

See our latest analysis for Madras Fertilizers

Madras Fertilizers isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over the last three years Madras Fertilizers has grown its revenue at 6.4% annually. That's not a very high growth rate considering it doesn't make profits. In that time the share price is up 12% per year, which is not unreasonable given the revenue gorwth. The real question is when the business will generate profits, and how quickly they will grow. Given the market doesn't seem too excited about the stock, a closer look at the financial data could pay off, if you can find indications of a stronger growth trend in the future.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

NSEI:MADRASFERT Income Statement, August 21st 2019
NSEI:MADRASFERT Income Statement, August 21st 2019

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

A Different Perspective

While the broader market lost about 12% in the twelve months, Madras Fertilizers shareholders did even worse, losing 22%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 1.8% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.

But note: Madras Fertilizers 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.

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.