If You Had Bought SBI Life Insurance (NSE:SBILIFE) Stock Three Years Ago, You Could Pocket A 17% Gain Today

By buying an index fund, investors can approximate the average market return. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, SBI Life Insurance Company Limited (NSE:SBILIFE) shareholders have seen the share price rise 17% over three years, well in excess of the market decline (1.6%, not including dividends).

Check out our latest analysis for SBI Life Insurance

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During three years of share price growth, SBI Life Insurance achieved compound earnings per share growth of 12% per year. The average annual share price increase of 5% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock. Of course, with a P/E ratio of 55.94, the market remains optimistic.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

Dive deeper into SBI Life Insurance's key metrics by checking this interactive graph of SBI Life Insurance's earnings, revenue and cash flow.

A Different Perspective

SBI Life Insurance shareholders are down 4.0% for the year, but the broader market is up 8.7%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Investors are up over three years, booking 6% per year, much better than the more recent returns. Sometimes when a good quality long term winner has a weak period, it's turns out to be an opportunity, but you really need to be sure that the quality is there. If you would like to research SBI Life Insurance in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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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