Investors bid Prime Focus (NSE:PFOCUS) up ₹4.7b despite increasing losses YoY, taking five-year CAGR to 22%

Simply Wall St · 10/15 00:14

When you buy a stock there is always a possibility that it could drop 100%. But when you pick a company that is really flourishing, you can make more than 100%. Long term Prime Focus Limited (NSE:PFOCUS) shareholders would be well aware of this, since the stock is up 174% in five years. It's also good to see the share price up 17% over the last quarter.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

View our latest analysis for Prime Focus

Because Prime Focus made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

For the last half decade, Prime Focus can boast revenue growth at a rate of 13% per year. That's a pretty good long term growth rate. Broadly speaking, this solid progress may well be reflected by the healthy share price gain of 22% per year over five years. It's well worth monitoring the growth trend in revenue, because if growth accelerates, that might signal an opportunity. When a growth trend accelerates, be it in revenue or earnings, it can indicate an inflection point for the business, which is can often be an opportunity for investors.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
NSEI:PFOCUS Earnings and Revenue Growth October 15th 2024

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

It's nice to see that Prime Focus shareholders have received a total shareholder return of 56% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 22% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Prime Focus better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Prime Focus you should know about.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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