We're definitely into long term investing, but some companies are simply bad investments over any time frame. It hits us in the gut when we see fellow investors suffer a loss. For example, we sympathize with anyone who was caught holding Sintex Industries Limited (NSE:SINTEX) during the five years that saw its share price drop a whopping 97%. We also note that the stock has performed poorly over the last year, with the share price down 79%. Shareholders have had an even rougher run lately, with the share price down 66% in the last 90 days.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the five years over which the share price declined, Sintex Industries's earnings per share (EPS) dropped by 50% each year. In this case, the EPS change is really very close to the share price drop of 50% a year. This suggests that market participants have not changed their view of the company all that much. Rather, the share price has approximately tracked EPS growth.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on Sintex Industries's earnings, revenue and cash flow.
A Dividend Lost
It's important to keep in mind that we've been talking about the share price returns, which don't include dividends, while the total shareholder return does. In some ways, TSR is a better measure of how well an investment has performed. Over the last 5 years, Sintex Industries generated a TSR of -91%, which is, of course, better than the share price return. Even though the company isn't paying dividends at the moment, it has done in the past.
A Different Perspective
We regret to report that Sintex Industries shareholders are down 79% for the year. Unfortunately, that's worse than the broader market decline of 3.6%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 38% per year over five years. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. Before forming an opinion on Sintex Industries you might want to consider these 3 valuation metrics.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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 email@example.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.