Is Cineline India’s (NSE:CINELINE) 211% Share Price Increase Well Justified?

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It hasn’t been the best quarter for Cineline India Limited (NSE:CINELINE) shareholders, since the share price has fallen 11% in that time. But that scarcely detracts from the really solid long term returns generated by the company over five years. Indeed, the share price is up an impressive 211% in that time. So while it’s never fun to see a share price fall, it’s important to look at a longer time horizon. Only time will tell if there is still too much optimism currently reflected in the share price.

View our latest analysis for Cineline India

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

During five years of share price growth, Cineline India achieved compound earnings per share (EPS) growth of 26% per year. That makes the EPS growth particularly close to the yearly share price growth of 25%. That suggests that the market sentiment around the company hasn’t changed much over that time. Indeed, it would appear the share price is reacting to the EPS.

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

NSEI:CINELINE Past and Future Earnings, June 14th 2019
NSEI:CINELINE Past and Future Earnings, June 14th 2019

It might be well worthwhile taking a look at our free report on Cineline India’s earnings, revenue and cash flow.

A Different Perspective

Cineline India shareholders are down 34% for the year, but the market itself is up 0.6%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 26% 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 forming an opinion on Cineline India you might want to consider these 3 valuation metrics.

But note: Cineline India may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IN exchanges.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.