Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. Investors in ReNew Energy Global Plc (NASDAQ:RNW) have tasted that bitter downside in the last year, as the share price dropped 27%. That's disappointing when you consider the market declined 14%. We wouldn't rush to judgement on ReNew Energy Global because we don't have a long term history to look at. But it's up 6.9% in the last week. But this could be related to the strong market, with stocks up around 3.8% in the same time.
On a more encouraging note the company has added ₹184m to its market cap in just the last 7 days, so let's see if we can determine what's driven the one-year loss for shareholders.
Because ReNew Energy Global 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last twelve months, ReNew Energy Global increased its revenue by 32%. We think that is pretty nice growth. Meanwhile, the share price is down 27% over twelve months, which is disappointing given the progress made. You might even wonder if the share price was previously over-hyped. But if revenue keeps growing, then at a certain point the share price would likely follow.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. You can see what analysts are predicting for ReNew Energy Global in this interactive graph of future profit estimates.
A Different Perspective
We doubt ReNew Energy Global shareholders are happy with the loss of 27% over twelve months. That falls short of the market, which lost 14%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. Putting aside the last twelve months, it's good to see the share price has rebounded by 1.3%, in the last ninety days. This could just be a bounce because the selling was too aggressive, but fingers crossed it's the start of a new trend. It's always interesting to track share price performance over the longer term. But to understand ReNew Energy Global better, we need to consider many other factors. Even so, be aware that ReNew Energy Global is showing 2 warning signs in our investment analysis , and 1 of those shouldn't be ignored...
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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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.
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