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Reditus, Sociedade Gestora de Participações Sociais, S.A. (ELI:RED) shareholders should be happy to see the share price up 11% in the last month. But spare a thought for the long term holders, who have held the stock as it bled value over the last five years. Five years have seen the share price descend precipitously, down a full 93%. So we don't gain too much confidence from the recent recovery. The important question is if the business itself justifies a higher share price in the long term.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
Check out our latest analysis for Reditus Sociedade Gestora de Participações Sociais
Because Reditus Sociedade Gestora de Participações Sociais is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over half a decade Reditus Sociedade Gestora de Participações Sociais reduced its trailing twelve month revenue by 28% for each year. That's definitely a weaker result than most pre-profit companies report. So it's not that strange that the share price dropped 42% per year in that period. We don't think this is a particularly promising picture. Ironically, that behavior could create an opportunity for the contrarian investor - but only if there are good reasons to predict a brighter future.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
This free interactive report on Reditus Sociedade Gestora de Participações Sociais's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
We regret to report that Reditus Sociedade Gestora de Participações Sociais shareholders are down 23% for the year. Unfortunately, that's worse than the broader market decline of 1.2%. 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. However, the loss over the last year isn't as bad as the 42% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. You could get a better understanding of Reditus Sociedade Gestora de Participações Sociais's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.