The five-year shareholder returns and company earnings persist lower as Indus Gas (LON:INDI) stock falls a further 10% in past week

We're definitely into long term investing, but some companies are simply bad investments over any time frame. We don't wish catastrophic capital loss on anyone. Spare a thought for those who held Indus Gas Limited (LON:INDI) for five whole years - as the share price tanked 76%. And we doubt long term believers are the only worried holders, since the stock price has declined 69% over the last twelve months. More recently, the share price has dropped a further 11% in a month.

If the past week is anything to go by, investor sentiment for Indus Gas isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

Check out our latest analysis for Indus Gas

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Looking back five years, both Indus Gas' share price and EPS declined; the latter at a rate of 2.9% per year. Readers should note that the share price has fallen faster than the EPS, at a rate of 25% per year, over the period. So it seems the market was too confident about the business, in the past. The low P/E ratio of 5.09 further reflects this reticence.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

While the broader market gained around 8.4% in the last year, Indus Gas shareholders lost 69%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 12% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Indus Gas better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Indus Gas , and understanding them should be part of your investment process.

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 British exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.