Investors might be losing patience for Bajaj Hindusthan Sugar's (NSE:BAJAJHIND) increasing losses, as stock sheds 12% over the past week

Simply Wall St · 05/10/2024 00:31

It hasn't been the best quarter for Bajaj Hindusthan Sugar Limited (NSE:BAJAJHIND) shareholders, since the share price has fallen 17% in that time. But that does not change the realty that the stock's performance has been terrific, over five years. In fact, during that period, the share price climbed 310%. Impressive! So we don't think the recent decline in the share price means its story is a sad one. The most important thing for savvy investors to consider is whether the underlying business can justify the share price gain.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

View our latest analysis for Bajaj Hindusthan Sugar

Bajaj Hindusthan Sugar wasn't profitable in the last twelve months, 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 hope to see good revenue growth. 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.

In the last 5 years Bajaj Hindusthan Sugar saw its revenue shrink by 3.4% per year. So it's pretty surprising to see that the share price is up 33% per year. There can be no doubt this kind of decoupling of revenue growth and share price growth is unusual to see in loss making companies. At the risk of upsetting holders, this does suggest that hope for a better future is playing a significant role in the share price action.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth
NSEI:BAJAJHIND Earnings and Revenue Growth May 10th 2024

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized 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. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

It's nice to see that Bajaj Hindusthan Sugar shareholders have received a total shareholder return of 129% over the last year. That's better than the annualised return of 33% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 1 warning sign for Bajaj Hindusthan Sugar you should be aware of.

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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Indian exchanges.