Reliance Industrial Infrastructure's (NSE:RIIL) Stock Price Has Reduced 18% In The Past Three Years

For many investors, the main point of stock picking is to generate higher returns than the overall market. 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 18% in three years, versus a market return of about 22%. It's up 2.8% in the last seven days.

View our latest analysis for Reliance Industrial Infrastructure

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.

Reliance Industrial Infrastructure saw its EPS decline at a compound rate of 5.0% per year, over the last three years. The share price decline of 6% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy. Of course, with a P/E ratio of 63.98, the market remains optimistic.

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.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Reliance Industrial Infrastructure the TSR over the last 3 years was -15%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Reliance Industrial Infrastructure provided a TSR of 8.7% over the last twelve months. But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 1.7% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should learn about the 2 warning signs we've spotted with Reliance Industrial Infrastructure (including 1 which shouldn't be ignored) .

Of course Reliance Industrial Infrastructure may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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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