Volatility 101: Should Banco Products (India) (NSE:BANCOINDIA) Shares Have Dropped 40%?

Banco Products (India) Limited (NSE:BANCOINDIA) shareholders should be happy to see the share price up 13% in the last month. But that doesn’t change the fact that the returns over the last year have been less than pleasing. After all, the share price is down 40% in the last year, significantly under-performing the market.

Check out our latest analysis for Banco Products (India)

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Unhappily, Banco Products (India) had to report a 51% decline in EPS over the last year. This fall in the EPS is significantly worse than the 40% the share price fall. So despite the weak per-share profits, some investors are probably relieved the situation wasn’t more difficult.

You can see below how EPS has changed over time.

NSEI:BANCOINDIA Past and Future Earnings, November 13th 2019
NSEI:BANCOINDIA Past and Future Earnings, November 13th 2019

Dive deeper into Banco Products (India)’s key metrics by checking this interactive graph of Banco Products (India)’s earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Banco Products (India), it has a TSR of -36% for the last year. That exceeds its share price return that we previously mentioned. And there’s no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Banco Products (India) shareholders are down 36% for the year (even including dividends) , but the market itself is up 7.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5.8% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Before forming an opinion on Banco Products (India) you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.

We will like Banco Products (India) 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.