Kiri Industries (NSE:KIRIINDUS) investors are up 12% in the past week, but earnings have declined over the last year

The simplest way to invest in stocks is to buy exchange traded funds. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Kiri Industries Limited (NSE:KIRIINDUS) share price is up 52% in the last 1 year, clearly besting the market decline of around 6.3% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! However, the longer term returns haven't been so impressive, with the stock up just 21% in the last three years.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

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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.

During the last year, Kiri Industries actually saw its earnings per share drop 25%.

Given the share price gain, we doubt the market is measuring progress with EPS. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.

Unfortunately Kiri Industries' fell 23% over twelve months. So the fundamental metrics don't provide an obvious explanation for the share price gain.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of Kiri Industries' earnings, revenue and cash flow.

A Different Perspective

It's good to see that Kiri Industries has rewarded shareholders with a total shareholder return of 52% in the last twelve months. That gain is better than the annual TSR over five years, which is 2%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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 Kiri Industries you should be aware of, and 1 of them doesn't sit too well with us.

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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.