Is Amber Enterprises India's (NSE:AMBER) 120% Share Price Increase Well Justified?

Unfortunately, investing is risky - companies can and do go bankrupt. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! For example, the Amber Enterprises India Limited (NSE:AMBER) share price has soared 120% in the last year. Most would be very happy with that, especially in just one year! On top of that, the share price is up 36% in about a quarter. But this move may well have been assisted by the reasonably buoyant market (up 23% in 90 days). Amber Enterprises India hasn't been listed for long, so it's still not clear if it is a long term winner.

See our latest analysis for Amber Enterprises India

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 the last year, Amber Enterprises India actually saw its earnings per share drop 40%.

So we don't think that investors are paying too much attention to EPS. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.

We doubt the modest 0.2% dividend yield is doing much to support the share price. Amber Enterprises India's revenue actually dropped 9.0% over last year. So using a snapshot of key business metrics doesn't give us a good picture of why the market is bidding up the stock.

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

Amber Enterprises India is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling Amber Enterprises India stock, you should check out this free report showing analyst consensus estimates for future profits.

A Different Perspective

Amber Enterprises India boasts a total shareholder return of 121% for the last year (that includes the dividends) . A substantial portion of that gain has come in the last three months, with the stock up 36% in that time. This suggests the company is continuing to win over new investors. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Amber Enterprises India is showing 2 warning signs in our investment analysis , you should know about...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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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