How Much Did ICRA's(NSE:ICRA) Shareholders Earn From Share Price Movements Over The Last Five Years?

For many, the main point of investing is to generate higher returns than the overall market. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in ICRA Limited (NSE:ICRA), since the last five years saw the share price fall 41%. It's down 1.7% in the last seven days.

View our latest analysis for ICRA

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

While the share price declined over five years, ICRA actually managed to increase EPS by an average of 3.8% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.

Based on these numbers, we'd venture that the market may have been over-optimistic about forecast growth, half a decade ago. Having said that, we might get a better idea of what's going on with the stock by looking at other metrics.

We don't think that the 1.0% is big factor in the share price, since it's quite small, as dividends go. The revenue fall of 1.1% per year for five years is neither good nor terrible. But it's quite possible the market had expected better; a closer look at the revenue trends might explain the pessimism.

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

If you are thinking of buying or selling ICRA stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of ICRA, it has a TSR of -38% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While the broader market gained around 9.4% in the last year, ICRA shareholders lost 3.2% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 7% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand ICRA better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for ICRA you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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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