The past five-year earnings decline for UFO Moviez India (NSE:UFO) likely explains shareholders long-term losses

UFO Moviez India Limited (NSE:UFO) shareholders should be happy to see the share price up 14% in the last month. But if you look at the last five years the returns have not been good. In fact, the share price is down 52%, which falls well short of the return you could get by buying an index fund.

Although the past week has been more reassuring for shareholders, they’re still in the red over the last five years, so let’s see if the underlying business has been responsible for the decline.

Check out our latest analysis for UFO Moviez India

Given that UFO Moviez India only made minimal earnings in the last twelve months, we’ll focus on revenue to gauge its business development. Generally speaking, we’d consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last five years UFO Moviez India saw its revenue shrink by 19% per year. That puts it in an unattractive cohort, to put it mildly. Arguably, the market has responded appropriately to this business performance by sending the share price down 9% (annualized) in the same time period. It’s fair to say most investors don’t like to invest in loss making companies with falling revenue. You’d want to research this company pretty thoroughly before buying, it looks a bit too risky for us.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About The Total Shareholder Return (TSR)?

We’d be remiss not to mention the difference between UFO Moviez India’s total shareholder return (TSR) and its share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Its history of dividend payouts mean that UFO Moviez India’s TSR, which was a 39% drop over the last 5 years, was not as bad as the share price return.

A Different Perspective

We’re pleased to report that UFO Moviez India shareholders have received a total shareholder return of 35% over one year. Notably the five-year annualised TSR loss of 7% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that UFO Moviez India is showing 2 warning signs in our investment analysis , and 1 of those doesn’t sit too well with us…

We will like UFO Moviez India better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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