Investors one-year losses continue as Mishra Dhatu Nigam (NSE:MIDHANI) dips a further 8.5% this week, earnings continue to decline

It's easy to match the overall market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Investors in Mishra Dhatu Nigam Limited (NSE:MIDHANI) have tasted that bitter downside in the last year, as the share price dropped 39%. That's well below the market decline of 3.2%. On the bright side, the stock is actually up 31% in the last three years. The falls have accelerated recently, with the share price down 21% in the last three months. But this could be related to the weak market, which is down 10% in the same period.

If the past week is anything to go by, investor sentiment for Mishra Dhatu Nigam isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

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While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Unhappily, Mishra Dhatu Nigam had to report a 9.8% decline in EPS over the last year. The share price decline of 39% is actually more than the EPS drop. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free interactive report on Mishra Dhatu Nigam's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market lost about 3.2% in the twelve months, Mishra Dhatu Nigam shareholders did even worse, losing 39%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 6% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Before deciding if you like the current share price, check how Mishra Dhatu Nigam scores on these 3 valuation metrics .

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 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.