It is doubtless a positive to see that the Indiabulls Ventures Limited (NSE:IBVENTUREPP) share price has gained some 248% in the last three months. But that is minimal compensation for the share price under-performance over the last year. In fact the stock is down 12% in the last year, well below the market return.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).
Unfortunately Indiabulls Ventures reported an EPS drop of 99% for the last year. Readers should not this outcome was influenced by the impact of extraordinary items on EPS. The share price fall of 12% isn’t as bad as the reduction in earnings per share. It may have been that the weak EPS was not as bad as some had feared. With a P/E ratio of 2.39k, it’s fair to say the market sees an EPS rebound on the cards.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Indiabulls Ventures, it has a TSR of -9.2% for the last year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While Indiabulls Ventures shareholders are down 9.2% for the year (even including dividends), the market itself is up 5.6%. While the aim is to do better than that, it’s worth recalling that even great long-term investments sometimes underperform for a year or more. It’s great to see a nice little 248% rebound in the last three months. Let’s just hope this isn’t the widely-feared ‘dead cat bounce’ (which would indicate further declines to come). 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. Consider risks, for instance. Every company has them, and we’ve spotted 5 warning signs for Indiabulls Ventures you should know about.
We will like Indiabulls Ventures 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 IN exchanges.
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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. 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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