Even though Linc (NSE:LINC) has lost ₹1.2b market cap in last 7 days, shareholders are still up 284% over 3 years

The Linc Limited (NSE:LINC) share price has had a bad week, falling 12%. But that doesn't change the fact that the returns over the last three years have been very strong. Indeed, the share price is up a very strong 279% in that time. So the recent fall in the share price should be viewed in that context. The thing to consider is whether the underlying business is doing well enough to support the current price.

While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

Check out our latest analysis for Linc

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

Linc became profitable within the last three years. Given the importance of this milestone, it's not overly surprising that the share price has increased strongly.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Linc the TSR over the last 3 years was 284%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Linc shareholders are down 12% for the year (even including dividends), but the market itself is up 44%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 23%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Linc better, we need to consider many other factors. For example, we've discovered 1 warning sign for Linc that you should be aware of before investing here.

Linc 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 Indian 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.