The past three years for Adani Green Energy (NSE:ADANIGREEN) investors has not been profitable

If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But long term Adani Green Energy Limited (NSE:ADANIGREEN) shareholders have had a particularly rough ride in the last three year. Sadly for them, the share price is down 52% in that time. And more recent buyers are having a tough time too, with a drop of 37% in the last year.

It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.

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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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the unfortunate three years of share price decline, Adani Green Energy actually saw its earnings per share (EPS) improve by 60% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.

Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

Revenue is actually up 23% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating Adani Green Energy further; while we may be missing something on this analysis, there might also be an opportunity.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

It is of course excellent to see how Adani Green Energy has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

While the broader market gained around 4.6% in the last year, Adani Green Energy shareholders lost 37%. 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. Longer term investors wouldn't be so upset, since they would have made 3%, each year, over five years. 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. 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. Even so, be aware that Adani Green Energy is showing 1 warning sign in our investment analysis , you should know about...

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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.