If You Had Bought Insecticides (India)'s (NSE:INSECTICID) Shares Three Years Ago You Would Be Down 36%

While not a mind-blowing move, it is good to see that the Insecticides (India) Limited (NSE:INSECTICID) share price has gained 14% in the last three months. But that cannot eclipse the less-than-impressive returns over the last three years. In fact, the share price is down 36% in the last three years, falling well short of the market return.

View our latest analysis for Insecticides (India)

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.

During the unfortunate three years of share price decline, Insecticides (India) actually saw its earnings per share (EPS) improve by 13% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

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.

The modest 0.9% dividend yield is unlikely to be guiding the market view of the stock. Revenue is actually up 10% over the three years, so the share price drop doesn't seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching Insecticides (India) more closely, as sometimes stocks fall unfairly. This could present an opportunity.

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

If you are thinking of buying or selling Insecticides (India) stock, you should check out this FREE detailed report on its balance sheet.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Insecticides (India)'s total shareholder return (TSR) and its share price return. 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. Its history of dividend payouts mean that Insecticides (India)'s TSR, which was a 34% drop over the last 3 years, was not as bad as the share price return.

A Different Perspective

Insecticides (India) shareholders are down 33% for the year (even including dividends) , but the market itself is up 1.0%. 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 2.5% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Case in point: We've spotted 2 warning signs for Insecticides (India) you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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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