Investors five-year losses continue as Bandhan Bank (NSE:BANDHANBNK) dips a further 8.4% this week, earnings continue to decline

Generally speaking long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. For example the Bandhan Bank Limited (NSE:BANDHANBNK) share price dropped 54% over five years. That is extremely sub-optimal, to say the least. The last week also saw the share price slip down another 8.4%. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

Since Bandhan Bank has shed ₹23b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

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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 Bandhan Bank's share price and EPS declined; the latter at a rate of 15% per year. In this case, the EPS change is really very close to the share price drop of 14% a year. That suggests that the market sentiment around the company hasn't changed much over that time. So it's fair to say the share price has been responding to changes in EPS.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on Bandhan Bank's earnings, revenue and cash flow.

A Different Perspective

Investors in Bandhan Bank had a tough year, with a total loss of 12% (including dividends), against a market gain of about 2.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 9% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand Bandhan Bank better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Bandhan Bank you should know about.

We will like Bandhan Bank better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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 Indian exchanges.

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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.