If You Had Bought Reliance Industrial Infrastructure's (NSE:RIIL) Shares Three Years Ago You Would Be Down 32%

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Reliance Industrial Infrastructure Limited (NSE:RIIL) shareholders have had that experience, with the share price dropping 32% in three years, versus a market return of about 5.2%.

Check out our latest analysis for Reliance Industrial Infrastructure

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Reliance Industrial Infrastructure saw its EPS decline at a compound rate of 4.8% per year, over the last three years. This reduction in EPS is slower than the 12% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy. Having said that, the market is still optimistic, given the P/E ratio of 61.45.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

This free interactive report on Reliance Industrial Infrastructure's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's good to see that Reliance Industrial Infrastructure has rewarded shareholders with a total shareholder return of 26% in the last twelve months. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 3% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Take risks, for example - Reliance Industrial Infrastructure has 2 warning signs (and 1 which can't be ignored) we think you should know about.

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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