IFB Agro Industries (NSE:IFBAGRO) shareholders notch a 13% CAGR over 5 years, yet earnings have been shrinking

The main point of investing for the long term is to make money. Furthermore, you'd generally like to see the share price rise faster than the market. But IFB Agro Industries Limited (NSE:IFBAGRO) has fallen short of that second goal, with a share price rise of 87% over five years, which is below the market return. Zooming in, the stock is up a respectable 18% in the last year.

Since the stock has added ₹545m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Our free stock report includes 3 warning signs investors should be aware of before investing in IFB Agro Industries. Read for free now.

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.

IFB Agro Industries' earnings per share are down 8.1% per year, despite strong share price performance over five years.

Essentially, it doesn't seem likely that investors are focused on EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

On the other hand, IFB Agro Industries' revenue is growing nicely, at a compound rate of 4.5% over the last five years. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

It's nice to see that IFB Agro Industries shareholders have received a total shareholder return of 18% over the last year. That's better than the annualised return of 13% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for IFB Agro Industries (of which 1 can't be ignored!) you should know about.

We will like IFB Agro Industries better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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 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.