If You Had Bought CARE Ratings' (NSE:CARERATING) Shares Three Years Ago You Would Be Down 63%

This month, we saw the CARE Ratings Limited (NSE:CARERATING) up an impressive 64%. But over the last three years we've seen a quite serious decline. Indeed, the share price is down a tragic 63% in the last three years. Some might say the recent bounce is to be expected after such a bad drop. The rise has some hopeful, but turnarounds are often precarious.

Check out our latest analysis for CARE Ratings

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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, CARE Ratings' earnings per share (EPS) dropped by 22% each year. The share price decline of 29% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

Dive deeper into CARE Ratings' key metrics by checking this interactive graph of CARE Ratings's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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, CARE Ratings' TSR for the last 3 years was -58%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

CARE Ratings provided a TSR of 8.9% over the year (including dividends). That's fairly close to the broader market return. The silver lining is that the share price is up in the short term, which flies in the face of the annualised loss of 9% over the last five years. We're pretty skeptical of turnaround stories, but it's good to see the recent share price recovery. It's always interesting to track share price performance over the longer term. But to understand CARE Ratings better, we need to consider many other factors. For instance, we've identified 3 warning signs for CARE Ratings (1 is concerning) that you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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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This article by Simply Wall St is general in nature. 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.
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