Sadbhav Engineering (NSE:SADBHAV) Share Prices Have Dropped 85% In The Last Three Years

While it may not be enough for some shareholders, we think it is good to see the Sadbhav Engineering Limited (NSE:SADBHAV) share price up 28% in a single quarter. But only the myopic could ignore the astounding decline over three years. To wit, the share price sky-dived 85% in that time. Arguably, the recent bounce is to be expected after such a bad drop. But the more important question is whether the underlying business can justify a higher price still.

While a drop like that is definitely a body blow, money isn't as important as health and happiness.

See our latest analysis for Sadbhav Engineering

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 five years of share price growth, Sadbhav Engineering moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. So given the share price is down it's worth checking some other metrics too.

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).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. You can see what analysts are predicting for Sadbhav Engineering in this interactive graph of future profit estimates.

A Different Perspective

While the broader market gained around 17% in the last year, Sadbhav Engineering shareholders lost 43%. 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 13% 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. 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. Even so, be aware that Sadbhav Engineering is showing 5 warning signs in our investment analysis , and 2 of those make us uncomfortable...

There are plenty of other companies that have insiders buying up shares. You probably do 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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