Indoco Remedies' (NSE:INDOCO three-year decrease in earnings delivers investors with a 27% loss

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Indoco Remedies Limited (NSE:INDOCO) shareholders have had that experience, with the share price dropping 28% in three years, versus a market return of about 56%. And over the last year the share price fell 23%, so we doubt many shareholders are delighted. Unfortunately the share price momentum is still quite negative, with prices down 13% in thirty days.

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

View our latest analysis for Indoco Remedies

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 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.

Indoco Remedies saw its EPS decline at a compound rate of 38% per year, over the last three years. This fall in the EPS is worse than the 10% compound annual share price fall. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term. This positive sentiment is also reflected in the generous P/E ratio of 82.58.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We consider it positive that insiders have made significant purchases in the last year. 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 Indoco Remedies' earnings, revenue and cash flow.

A Different Perspective

Indoco Remedies shareholders are down 22% for the year (even including dividends), but the market itself is up 13%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 5% 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. It's always interesting to track share price performance over the longer term. But to understand Indoco Remedies better, we need to consider many other factors. Even so, be aware that Indoco Remedies is showing 4 warning signs in our investment analysis , and 2 of those are a bit unpleasant...

Indoco Remedies is not the only stock that insiders are buying. For those who like to find lesser know companies this free list of growing companies with recent insider purchasing, could be just the ticket.

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.