The five-year shareholder returns and company earnings persist lower as Spandana Sphoorty Financial (NSE:SPANDANA) stock falls a further 12% in past week

We're definitely into long term investing, but some companies are simply bad investments over any time frame. We really hate to see fellow investors lose their hard-earned money. For example, we sympathize with anyone who was caught holding Spandana Sphoorty Financial Limited (NSE:SPANDANA) during the five years that saw its share price drop a whopping 73%. And some of the more recent buyers are probably worried, too, with the stock falling 68% in the last year. Furthermore, it's down 45% in about a quarter. That's not much fun for holders.

Since Spandana Sphoorty Financial has shed ₹3.1b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for Spandana Sphoorty Financial

There is no denying that markets are sometimes efficient, but prices do not always reflect 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.

During the five years over which the share price declined, Spandana Sphoorty Financial's earnings per share (EPS) dropped by 23% each year. This change in EPS is remarkably close to the 23% average annual decrease in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Rather, the share price has approximately tracked EPS growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Spandana Sphoorty Financial has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

Investors in Spandana Sphoorty Financial had a tough year, with a total loss of 68%, against a market gain of about 21%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 12% per year over five years. 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. It's always interesting to track share price performance over the longer term. But to understand Spandana Sphoorty Financial better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Spandana Sphoorty Financial you should be aware of, and 1 of them doesn't sit too well with us.

But note: Spandana Sphoorty Financial may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.