Despite the downward trend in earnings at Godrej Agrovet (NSE:GODREJAGRO) the stock rises 7.2%, bringing one-year gains to 31%

There's no doubt that investing in the stock market is a truly brilliant way to build wealth. But not every stock you buy will perform as well as the overall market. Unfortunately for shareholders, while the Godrej Agrovet Limited (NSE:GODREJAGRO) share price is up 29% in the last year, that falls short of the market return. Having said that, the longer term returns aren't so impressive, with stock gaining just 13% in three years.

Since it's been a strong week for Godrej Agrovet shareholders, let's have a look at trend of the longer term fundamentals.

See our latest analysis for Godrej Agrovet

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 last year, Godrej Agrovet actually saw its earnings per share drop 15%.

Given the share price gain, we doubt the market is measuring progress with EPS. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.

We are skeptical of the suggestion that the 1.7% dividend yield would entice buyers to the stock. Revenue was pretty stable on last year, so deeper research might be needed to explain the share price rise.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. If you are thinking of buying or selling Godrej Agrovet stock, you should check out this free report showing analyst profit forecasts.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Godrej Agrovet the TSR over the last 1 year was 31%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Godrej Agrovet shareholders are up 31% for the year (even including dividends). But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 3% per year over five year. This suggests the company might be improving over time. 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. Case in point: We've spotted 2 warning signs for Godrej Agrovet you should be aware of.

Godrej Agrovet is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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.