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It's easy to match the overall market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Unfortunately the Kirloskar Oil Engines Limited (NSE:KIRLOSENG) share price slid 51% over twelve months. That falls noticeably short of the market return of around 0.7%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 29% in three years. The falls have accelerated recently, with the share price down 14% in the last three months.
Check out our latest analysis for Kirloskar Oil Engines
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...' 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.
Unhappily, Kirloskar Oil Engines had to report a 17% decline in EPS over the last year. This reduction in EPS is not as bad as the 51% share price fall. So it seems the market was too confident about the business, a year ago.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
This free interactive report on Kirloskar Oil Engines's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What about the Total Shareholder Return (TSR)?
We've already covered Kirloskar Oil Engines's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for Kirloskar Oil Engines shareholders, and that cash payout explains why its total shareholder loss of 50%, over the last year, isn't as bad as the share price return.
A Different Perspective
While the broader market gained around 0.7% in the last year, Kirloskar Oil Engines shareholders lost 50% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 1.2% 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. Is Kirloskar Oil Engines cheap compared to other companies? These 3 valuation measures might help you decide.