Investors more bullish on Macrotech Developers (NSE:LODHA) this week as stock lifts 4.2%, despite earnings trending downwards over past year

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Macrotech Developers Limited (NSE:LODHA) share price is 27% higher than it was a year ago, much better than the market return of around 17% (not including dividends) in the same period. That's a solid performance by our standards! Note that businesses generally develop over the long term, so the returns over the last year might not reflect a long term trend.

Since the stock has added ₹28b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Macrotech Developers

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Over the last twelve months, Macrotech Developers actually shrank its EPS by 62%.

So we don't think that investors are paying too much attention to EPS. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.

We doubt the modest 0.1% dividend yield is doing much to support the share price. Revenue was pretty flat year on year, but maybe a closer look at the data can explain the market optimism.

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

Macrotech Developers is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Macrotech Developers in this interactive graph of future profit estimates.

A Different Perspective

Macrotech Developers shareholders should be happy with the total gain of 27% over the last twelve months, including dividends. And the share price momentum remains respectable, with a gain of 55% in the last three months. This suggests the company is continuing to win over new investors. 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. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Macrotech Developers you should know about.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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.