The five-year returns have been massive for Unichem Laboratories (NSE:UNICHEMLAB) shareholders despite underlying losses increasing

Simply Wall St · 10/18 03:42

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But when you pick a company that is really flourishing, you can make more than 100%. For instance, the price of Unichem Laboratories Limited (NSE:UNICHEMLAB) stock is up an impressive 285% over the last five years. Also pleasing for shareholders was the 41% gain in the last three months.

Since the stock has added ₹4.4b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Unichem Laboratories

Unichem Laboratories isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually desire strong 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 Unichem Laboratories saw its revenue grow at 6.5% per year. That's a fairly respectable growth rate. Broadly speaking, this solid progress may well be reflected by the healthy share price gain of 31% 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:UNICHEMLAB Earnings and Revenue Growth October 18th 2024

If you are thinking of buying or selling Unichem Laboratories stock, you should check out this FREE detailed report on its balance sheet.

What About The Total Shareholder Return (TSR)?

We've already covered Unichem Laboratories' share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Unichem Laboratories' TSR of 302% for the 5 years exceeded its share price return, because it has paid dividends.

A Different Perspective

We're pleased to report that Unichem Laboratories shareholders have received a total shareholder return of 73% over one year. That's better than the annualised return of 32% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Unichem Laboratories , and understanding them should be part of your investment process.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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