GE Power India's (NSE:GEPIL) Stock Price Has Reduced 65% In The Past Three Years

Investing in stocks inevitably means buying into some companies that perform poorly. But the last three years have been particularly tough on longer term GE Power India Limited (NSE:GEPIL) shareholders. Unfortunately, they have held through a 65% decline in the share price in that time. And more recent buyers are having a tough time too, with a drop of 59% in the last year. Shareholders have had an even rougher run lately, with the share price down 31% in the last 90 days.

Check out our latest analysis for GE Power 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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Although the share price is down over three years, GE Power India actually managed to grow EPS by 72% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

The modest 0.7% dividend yield is unlikely to be guiding the market view of the stock. The company has kept revenue pretty healthy over the last three years, so we doubt that explains the falling share price. We're not entirely sure why the share price is dropped, but it does seem likely investors have become less optimistic about the business.

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

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

Investors in GE Power India had a tough year, with a total loss of 58% (including dividends), against a market gain of about 18%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 9% 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 GE Power India better, we need to consider many other factors. Even so, be aware that GE Power India is showing 3 warning signs in our investment analysis , and 1 of those is significant...

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 IN exchanges.

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