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Imagine Owning Asian Hotels (North) (NSE:ASIANHOTNR) And Wondering If The 37% Share Price Slide Is Justified

Simply Wall St

The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Unfortunately the Asian Hotels (North) Limited (NSE:ASIANHOTNR) share price slid 37% over twelve months. That's disappointing when you consider the market returned 8.2%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 10% in three years. The falls have accelerated recently, with the share price down 15% in the last three months.

See our latest analysis for Asian Hotels (North)

Asian Hotels (North) 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. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

Asian Hotels (North)'s revenue didn't grow at all in the last year. In fact, it fell 0.7%. That looks pretty grim, at a glance. The stock price has languished lately, falling 37% in a year. What would you expect when revenue is falling, and it doesn't make a profit? It's hard to escape the conclusion that buyers must envision either growth down the track, cost cutting, or both.

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

NSEI:ASIANHOTNR Income Statement, October 20th 2019

This free interactive report on Asian Hotels (North)'s balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Asian Hotels (North) shareholders are down 37% for the year, but the market itself is up 8.2%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4.6% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.

But note: Asian Hotels (North) may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.