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As an investor, mistakes are inevitable. But you have a problem if you face massive losses more than once in a while. So consider, for a moment, the misfortune of Inox Wind Limited (NSE:INOXWIND) investors who have held the stock for three years as it declined a whopping 73%. That would be a disturbing experience. And the ride hasn't got any smoother in recent times over the last year, with the price 41% lower in that time.
Check out our latest analysis for Inox Wind
Inox Wind 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last three years Inox Wind saw its revenue shrink by 50% per year. That means its revenue trend is very weak compared to other loss making companies. The swift share price decline at an annual compound rate of 35%, reflects this weak fundamental performance. We prefer leave it to clowns to try to catch falling knives, like this stock. It's worth remembering that investors call buying a steeply falling share price 'catching a falling knife' because it is a dangerous pass time.
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 Inox Wind's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Inox Wind shareholders are down 41% for the year, but the broader market is up 0.9%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The three-year loss of 35% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. 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 could get a better understanding of Inox Wind's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
We will like Inox Wind better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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.