The three-year shareholder returns and company earnings persist lower as Lux Industries (NSE:LUXIND) stock falls a further 14% in past week

The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the last three years have been particularly tough on longer term Lux Industries Limited (NSE:LUXIND) shareholders. Unfortunately, they have held through a 53% decline in the share price in that time. Furthermore, it's down 16% in about a quarter. That's not much fun for holders. Of course, this share price action may well have been influenced by the 8.6% decline in the broader market, throughout the period.

If the past week is anything to go by, investor sentiment for Lux Industries isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for Lux Industries

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 the three years that the share price fell, Lux Industries' earnings per share (EPS) dropped by 21% each year. The 22% average annual share price decline is remarkably close to the EPS decline. That suggests that the market sentiment around the company hasn't changed much over that time, despite the disappointment. In this case, it seems that the EPS is guiding the share price.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Lux Industries has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

A Different Perspective

It's nice to see that Lux Industries shareholders have received a total shareholder return of 34% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 3%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before deciding if you like the current share price, check how Lux Industries scores on these 3 valuation metrics.

We will like Lux Industries 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.