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Tata Motors Limited (NSE:TATAMTRDVR) shareholders should be happy to see the share price up 21% in the last month. But that doesn't change the fact that the returns over the last three years have been disappointing. Indeed, the share price is down a tragic 65% in the last three years. Some might say the recent bounce is to be expected after such a bad drop. The rise has some hopeful, but turnarounds are often precarious.
See our latest analysis for Tata Motors
Given that Tata Motors only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
In the last three years, Tata Motors saw its revenue grow by 4.2% per year, compound. Given it's losing money in pursuit of growth, we are not really impressed with that. This uninspiring revenue growth has no doubt helped send the share price lower; it dropped 30% during the period. It can be well worth keeping an eye on growth stocks that disappoint the market, because sometimes they re-accelerate. Keep in mind it isn't unusual for good businesses to have a tough time or a couple of uninspiring years.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
Tata Motors is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
While the broader market lost about 0.6% in the twelve months, Tata Motors shareholders did even worse, losing 45%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 14% over the last half decade. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. Before deciding if you like the current share price, check how Tata Motors scores on these 3 valuation metrics.
Of course Tata Motors may not be the best stock to buy. So you may wish to see this free collection of growth stocks.