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Elgi Rubber Company Limited (NSE:ELGIRUBCO) shareholders should be happy to see the share price up 14% in the last month. But that doesn’t change the fact that the returns over the last year have been less than pleasing. After all, the share price is down 40% in the last year, significantly under-performing the market.
View our latest analysis for Elgi Rubber
Because Elgi Rubber is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last year Elgi Rubber saw its revenue grow by 9.4%. While that may seem decent it isn’t great considering the company is still making a loss. Given this fairly low revenue growth (and lack of profits), it’s not particularly surprising to see the stock down 40% in a year. It’s important not to lose sight of the fact that profitless companies must grow. So remember, if you buy a profitless company then you risk being a profitless investor.
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.
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Elgi Rubber’s earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We’ve already covered Elgi Rubber’s share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) and any discounted capital raisings offered to shareholders. Elgi Rubber’s TSR of was a loss of 40% for the year. That wasn’t as bad as its share price return, because it has paid dividends.
A Different Perspective
Investors in Elgi Rubber had a tough year, with a total loss of 40%, against a market gain of about 0.7%. 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. On the bright side, long term shareholders have made money, with a gain of 4.6% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares – and the price they paid.