Stock Analysis

The three-year decline in earnings might be taking its toll on Fairfax India Holdings (TSE:FIH.U) shareholders as stock falls 3.8% over the past week

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TSX:FIH.U
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It might be of some concern to shareholders to see the Fairfax India Holdings Corporation (TSE:FIH.U) share price down 10% in the last month. But at least the stock is up over the last three years. In that time, it is up 73%, which isn't bad, but not amazing either.

In light of the stock dropping 3.8% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive three-year return.

See our latest analysis for Fairfax India Holdings

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the three years of share price growth, Fairfax India Holdings actually saw its earnings per share (EPS) drop 26% per year.

This means it's unlikely the market is judging the company based on earnings growth. Therefore, we think it's worth considering other metrics as well.

You can only imagine how long term shareholders feel about the declining revenue trend (slipping at 26% per year). The only thing that's clear is there is low correlation between Fairfax India Holdings' share price and its historic fundamental data. Further research may be required!

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
TSX:FIH.U Earnings and Revenue Growth March 14th 2023

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So it makes a lot of sense to check out what analysts think Fairfax India Holdings will earn in the future (free profit forecasts).

A Different Perspective

We're pleased to report that Fairfax India Holdings shareholders have received a total shareholder return of 5.1% over one year. Notably the five-year annualised TSR loss of 5% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Fairfax India Holdings by clicking this link.

There are plenty of other companies that have insiders buying up shares. You probably do 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 CA exchanges.

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