April 17, 2024

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Should Softimat (EBR:SOFT) Be Disappointed With Their 89% Profit?

When we invest, we’re generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. For example, the Softimat S.A. (EBR:SOFT) share price is up 89% in the last 5 years, clearly besting the market return of around -35% (ignoring dividends). However, more recent returns haven’t been as impressive as that, with the stock returning just 20% in the last year.

See our latest analysis for Softimat

Given that Softimat 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. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over the last half decade Softimat’s revenue has actually been trending down at about 3.4% per year. Despite the lack of revenue growth, the stock has returned a respectable 14%, compound, over that time. It’s probably worth checking other factors such as the profitability, to try to understand the share price action. It may not be reflecting the revenue.

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

ENXTBR:SOFT Income Statement, March 11th 2020

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

A Different Perspective

It’s nice to see that Softimat shareholders have received a total shareholder return of 20% over the last year. That gain is better than the annual TSR over five years, which is 14%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It’s always interesting to track share price performance over the longer term. But to understand Softimat better, we need to consider many other factors. Case in point: We’ve spotted 4 warning signs for Softimat you should be aware of, and 1 of them can’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 BE exchanges.

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.

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. Thank you for reading.

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