Indiabulls Housing Finance (NSE:IBULHSGFIN) stock falls 24% in past week as five-year earnings and shareholder returns continue downward trend

We're definitely into long term investing, but some companies are simply bad investments over any time frame. It hits us in the gut when we see fellow investors suffer a loss. Imagine if you held Indiabulls Housing Finance Limited (NSE:IBULHSGFIN) for half a decade as the share price tanked 90%. And it's not just long term holders hurting, because the stock is down 41% in the last year. Furthermore, it's down 46% in about a quarter. That's not much fun for holders. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

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

View our latest analysis for Indiabulls Housing Finance

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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the five years over which the share price declined, Indiabulls Housing Finance's earnings per share (EPS) dropped by 17% each year. This reduction in EPS is less than the 37% annual reduction in the share price. This implies that the market is more cautious about the business these days. The low P/E ratio of 4.35 further reflects this reticence.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. As it happens, Indiabulls Housing Finance's TSR for the last 5 years was -88%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Indiabulls Housing Finance shareholders are down 38% for the year (even including dividends), but the market itself is up 13%. 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 13% 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. It's always interesting to track share price performance over the longer term. But to understand Indiabulls Housing Finance better, we need to consider many other factors. To that end, you should be aware of the 3 warning signs we've spotted with Indiabulls Housing Finance .

Indiabulls Housing Finance is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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. 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.