Aarti Industries (NSE:AARTIIND) sheds ₹15b, company earnings and investor returns have been trending downwards for past three years

If you love investing in stocks you're bound to buy some losers. Long term Aarti Industries Limited (NSE:AARTIIND) shareholders know that all too well, since the share price is down considerably over three years. Sadly for them, the share price is down 59% in that time. And over the last year the share price fell 35%, so we doubt many shareholders are delighted. The falls have accelerated recently, with the share price down 20% in the last three months. Of course, this share price action may well have been influenced by the 8.8% decline in the broader market, throughout the period.

With the stock having lost 9.4% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

See our latest analysis for Aarti Industries

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Aarti Industries saw its EPS decline at a compound rate of 12% per year, over the last three years. The share price decline of 26% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.

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

It might be well worthwhile taking a look at our free report on Aarti Industries' earnings, revenue and cash flow.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Aarti Industries' TSR for the last 3 years was -55%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Aarti Industries shareholders are down 35% for the year (even including dividends), but the market itself is up 6.4%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 0.7% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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 be aware of the 1 warning sign we've spotted with Aarti Industries .

Of course Aarti Industries 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 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.