Nippon Life India Asset Management (NSE:NAM-INDIA) sheds ₹8.3b, company earnings and investor returns have been trending downwards for past year

The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Investors in Nippon Life India Asset Management Limited (NSE:NAM-INDIA) have tasted that bitter downside in the last year, as the share price dropped 36%. That's disappointing when you consider the market returned 2.2%. On the other hand, the stock is actually up 5.0% over three years. More recently, the share price has dropped a further 9.4% in a month.

Since Nippon Life India Asset Management has shed ₹8.3b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Though if you're not interested in researching what drove NAM-INDIA's performance, we have a free list of interesting investing ideas to potentially inspire your next investment!

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Unhappily, Nippon Life India Asset Management had to report a 4.6% decline in EPS over the last year. The share price decline of 36% is actually more than the EPS drop. So it seems the market was too confident about the business, a year ago.

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

It might be well worthwhile taking a look at our free report on Nippon Life India Asset Management'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. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Nippon Life India Asset Management the TSR over the last 1 year was -34%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

The last twelve months weren't great for Nippon Life India Asset Management shares, which cost holders 34%, including dividends, while the market was up about 2.2%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Fortunately the longer term story is brighter, with total returns averaging about 4% per year over three years. Sometimes when a good quality long term winner has a weak period, it's turns out to be an opportunity, but you really need to be sure that the quality is there. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 2 warning signs for Nippon Life India Asset Management (1 doesn't sit too well with us) that you should be aware of.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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. 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.