Bata India (NSE:BATAINDIA shareholders incur further losses as stock declines 3.5% this week, taking three-year losses to 26%

For many investors, the main point of stock picking is to generate higher returns than the overall market. But if you try your hand at stock picking, you risk returning less than the market. Unfortunately, that's been the case for longer term Bata India Limited (NSE:BATAINDIA) shareholders, since the share price is down 30% in the last three years, falling well short of the market return of around 62%. Furthermore, it's down 14% in about a quarter. That's not much fun for holders.

Since Bata India has shed ₹6.5b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Bata India

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Bata India became profitable within the last five years. We would usually expect to see the share price rise as a result. So it's worth looking at other metrics to try to understand the share price move.

With a rather small yield of just 1.4% we doubt that the stock's share price is based on its dividend. Revenue is actually up 19% over the three years, so the share price drop doesn't seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching Bata India more closely, as sometimes stocks fall unfairly. This could present an opportunity.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Bata India is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling Bata India stock, you should check out this free report showing analyst consensus estimates for future profits.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Bata India's TSR for the last 3 years was -26%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Investors in Bata India had a tough year, with a total loss of 9.6% (including dividends), against a market gain of about 41%. 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 4% 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. To that end, you should be aware of the 3 warning signs we've spotted with Bata India .

We will like Bata India better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.