Puravankara (NSE:PURVA) pulls back 8.1% this week, but still delivers shareholders splendid 38% CAGR over 3 years
While Puravankara Limited (NSE:PURVA) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 11% in the last quarter. But that doesn't undermine the rather lovely longer-term return, if you measure over the last three years. In three years the stock price has launched 158% higher: a great result. To some, the recent share price pullback wouldn't be surprising after such a good run. The thing to consider is whether the underlying business is doing well enough to support the current price.
Since the long term performance has been good but there's been a recent pullback of 8.1%, let's check if the fundamentals match the share price.
Given that Puravankara didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. 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.
Over the last three years Puravankara has grown its revenue at 23% annually. That's much better than most loss-making companies. Meanwhile, the share price performance has been pretty solid at 37% compound over three years. This suggests the market has recognized the progress the business has made, at least to a significant degree. That's not to say we think the share price is too high. In fact, it might be worth keeping an eye on this one.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
If you are thinking of buying or selling Puravankara stock, you should check out this FREE detailed report on its balance sheet.
What About The Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Puravankara's total shareholder return (TSR) and its share price return. 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. Its history of dividend payouts mean that Puravankara's TSR of 164% over the last 3 years is better than the share price return.
A Different Perspective
Puravankara shareholders are down 37% for the year, but the market itself is up 4.1%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 22%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Even so, be aware that Puravankara is showing 1 warning sign in our investment analysis , 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.