The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the long term shareholders of The Indian Hume Pipe Company Limited (NSE:INDIANHUME) have had an unfortunate run in the last three years. Regrettably, they have had to cope with a 66% drop in the share price over that period. The more recent news is of little comfort, with the share price down 37% in a year. The silver lining is that the stock is up 3.6% in about a week.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
Indian Hume Pipe saw its EPS decline at a compound rate of 20% per year, over the last three years. The share price decline of 30% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
This free interactive report on Indian Hume Pipe's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
While the broader market gained around 0.9% in the last year, Indian Hume Pipe shareholders lost 37% (even including dividends). 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 2% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Indian Hume Pipe has 4 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.
Of course Indian Hume Pipe may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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. 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.
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