Did Changing Sentiment Drive TCI Finance's (NSE:TCIFINANCE) Share Price Down A Painful 82%?
Long term investing works well, but it doesn't always work for each individual stock. We really hate to see fellow investors lose their hard-earned money. For example, we sympathize with anyone who was caught holding TCI Finance Limited (NSE:TCIFINANCE) during the five years that saw its share price drop a whopping 82%. We also note that the stock has performed poorly over the last year, with the share price down 50%. The falls have accelerated recently, with the share price down 15% in the last three months.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
View our latest analysis for TCI Finance
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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, TCI Finance's earnings per share (EPS) dropped by 2.7% each year. Readers should note that the share price has fallen faster than the EPS, at a rate of 29% per year, over the period. So it seems the market was too confident about the business, in the past. The low P/E ratio of 2.10 further reflects this reticence.
You can see how EPS has changed over time in the image below.
It might be well worthwhile taking a look at our free report on TCI Finance's earnings, revenue and cash flow.
A Different Perspective
Investors in TCI Finance had a tough year, with a total loss of 50%, against a market gain of about 6.9%. 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 29% per year over five years. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
We will like TCI Finance better if we see some big insider buys. While we wait, check out this free list of growing companies 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 IN exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.