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Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Unfortunately the Electrosteel Castings Limited (NSE:ELECTCAST) share price slid 33% over twelve months. That's well bellow the market return of -0.6%. On the other hand, the stock is actually up 7.7% over three years. Unhappily, the share price slid 2.9% in the last week.
See our latest analysis for Electrosteel Castings
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Unhappily, Electrosteel Castings had to report a 14% decline in EPS over the last year. The share price decline of 33% is actually more than the EPS drop. This suggests the EPS fall has made some shareholders are more nervous about the business. The less favorable sentiment is reflected in its current P/E ratio of 5.86.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on Electrosteel Castings's earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Electrosteel Castings's total shareholder return (TSR) and its share price change, which we've covered above. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Dividends have been really beneficial for Electrosteel Castings shareholders, and that cash payout explains why its total shareholder loss of 32%, over the last year, isn't as bad as the share price return.
A Different Perspective
We regret to report that Electrosteel Castings shareholders are down 32% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 0.6%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.1% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Is Electrosteel Castings cheap compared to other companies? These 3 valuation measures might help you decide.