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Investors in Zomato (NSE:ZOMATO) have unfortunately lost 54% over the last year



Simply Wall St


Zomato Limited (NSE:ZOMATO) Shareholders will no doubt be very grateful to see the stock price rise 42% in the last quarter. But this is not enough to compensate for the decline of the last twelve months. Meanwhile, the stock price sank like a stone, falling 54%. The rally in the stock price is not so impressive considering the fall. Doubtless the fall has been exaggerated.

Now let’s look at the fundamentals of the business and see if the long-term shareholder return matches the performance of the underlying business.

Check opportunities and risks within the IN Online Retail industry.

Zomato has not been profitable for the past twelve months, we are unlikely to see a strong correlation between its stock price and its earnings per share (EPS). Income is arguably our second best option. Shareholders of unprofitable companies generally expect strong revenue growth. Indeed, it is difficult to be sure that a business will be sustainable if revenue growth is negligible and it never makes a profit.

Last year, Zomato saw its turnover increase by 85%. This is a solid result that is better than most other loss-making companies. During this time, the stock price fell 54%. Typically, a growth stock like this will be volatile, with some shareholders worried about red ink on the bottom line (i.e. losses). We would certainly consider this a positive if the company is trending towards profitability. If you see this happening, maybe consider adding this stock to your watchlist.

The image below shows how earnings and income have tracked over time (if you click on the image you can see more details).

NSEI: ZOMATO Earnings and Revenue Growth October 25, 2022

Zomato is well known to investors and many smart analysts have tried to predict future profit levels. We therefore recommend that you consult this free report showing consensus forecast

A different perspective

While Zomato shareholders are down 54% on the year, the market itself is up 0.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. It’s great to see a nice little rebound of 42% in the last three months. It could just be a bounce because the selloff was too aggressive, but fingers crossed it’s the start of a new trend. While it’s worth considering the various impacts that market conditions can have on the stock price, there are other, even more important factors. Take for example the ubiquitous specter of investment risk. We have identified 2 warning signs with Zomato (at least 1 which is concerning), and understanding them should be part of your investment process.

But note: Zomato may not be the best stock to buy. So take a look at this free list of interesting companies with past earnings growth (and new growth forecasts).

Please note that the market returns quoted in this article reflect the average market-weighted returns of the stocks currently trading on the IN exchanges.

Valuation is complex, but we help make it simple.

Find out if Zomato is potentially overvalued or undervalued by viewing our full analysis, which includes fair value estimates, risks and warnings, dividends, insider trading and financial health.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.