Some Bannari Amman Spinning Mills (NSE:BASML) Shareholders Have Copped A Big 58% Share Price Drop
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 Bannari Amman Spinning Mills Ltd (NSE:BASML) have had an unfortunate run in the last three years. Regrettably, they have had to cope with a 58% drop in the share price over that period. And more recent buyers are having a tough time too, with a drop of 34% in the last year. Shareholders have had an even rougher run lately, with the share price down 12% in the last 90 days.
View our latest analysis for Bannari Amman Spinning Mills
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.
Although the share price is down over three years, Bannari Amman Spinning Mills actually managed to grow EPS by 9.2% 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.
With a rather small yield of just 1.3% we doubt that the stock's share price is based on its dividend. With revenue flat over three years, it seems unlikely that the share price is reflecting the top line. There doesn't seem to be any clear correlation between the fundamental business metrics and the share price. That could mean that the stock was previously overrated, or it could spell opportunity now.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
If you are thinking of buying or selling Bannari Amman Spinning Mills stock, you should check out this FREE detailed report on its balance sheet.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Bannari Amman Spinning Mills's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Bannari Amman Spinning Mills's TSR, which was a 57% drop over the last 3 years, was not as bad as the share price return.
A Different Perspective
Bannari Amman Spinning Mills shareholders are down 33% for the year (even including dividends) , but the market itself is up 12%. 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 6.4% 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 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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Bannari Amman Spinning Mills (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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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