As an investor, mistakes are inevitable. But really bad investments should be rare. So spare a thought for the long term shareholders of Jain Irrigation Systems Limited (NSE:JISLDVREQS); the share price is down a whopping 76% in the last three years. That’d be enough to cause even the strongest minds some disquiet. And over the last year the share price fell 67%, so we doubt many shareholders are delighted. Shareholders have had an even rougher run lately, with the share price down 35% in the last 90 days.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
Although the share price is down over three years, Jain Irrigation Systems actually managed to grow EPS by 7.6% 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.
Since the change in EPS doesn’t seem to correlate with the change in share price, it’s worth taking a look at other metrics.
Given the healthiness of the dividend payments, we doubt that they’ve concerned the market. It’s good to see that Jain Irrigation Systems has increased its revenue over the last three years. If the company can keep growing revenue, there may be an opportunity for investors. You might have to dig deeper to understand the recent share price weakness.
You can see how revenue has changed over time in the image below.
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.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Jain Irrigation Systems’s TSR for the last 3 years was -74%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Jain Irrigation Systems shareholders are down 65% for the year (even including dividends) , but the market itself is up 4.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 23% per year over five years. We realise that Buffett 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 businesses. Importantly, we haven’t analysed Jain Irrigation Systems’s dividend history. This free visual report on its dividends is a must-read if you’re thinking of buying.
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.
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 firstname.lastname@example.org. 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.