Narmada Agrobase (NSE:NARMADA) shareholders YoY returns are lagging the company's 185% one-year earnings growth

The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Unfortunately the Narmada Agrobase Limited (NSE:NARMADA) share price slid 22% over twelve months. That falls noticeably short of the market return of around 44%. Because Narmada Agrobase hasn't been listed for many years, the market is still learning about how the business performs. The share price has dropped 27% in three months.

After losing 11% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

View our latest analysis for Narmada Agrobase

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.

Even though the Narmada Agrobase share price is down over the year, its EPS actually improved. It's quite possible that growth expectations may have been unreasonable in the past.

It's surprising to see the share price fall so much, despite the improved EPS. But we might find some different metrics explain the share price movements better.

Narmada Agrobase managed to grow revenue over the last year, which is usually a real positive. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.

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

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of Narmada Agrobase's earnings, revenue and cash flow.

What About The Total Shareholder Return (TSR)?

We've already covered Narmada Agrobase's share price action, but we should also mention its total shareholder return (TSR). 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. Dividends have been really beneficial for Narmada Agrobase shareholders, and that cash payout contributed to why its TSR of 37%, over the last 1 year, is better than the share price return.

A Different Perspective

Narmada Agrobase shareholders are up 37% for the year. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 15% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. It's always interesting to track share price performance over the longer term. But to understand Narmada Agrobase better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Narmada Agrobase (at least 2 which are potentially serious) , and understanding them should be part of your investment process.

But note: Narmada Agrobase may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.