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When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on a lighter note, a good company can see its share price rise well over 100%. For example, the Mahindra CIE Automotive Limited (NSE:MAHINDCIE) share price has soared 102% in the last half decade. Most would be very happy with that.
Check out our latest analysis for Mahindra CIE Automotive
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 last half decade, Mahindra CIE Automotive became profitable. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. Indeed, the Mahindra CIE Automotive share price has gained 21% in three years. During the same period, EPS grew by 38% each year. This EPS growth is higher than the 6.6% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on Mahindra CIE Automotive's earnings, revenue and cash flow.
A Different Perspective
While the broader market lost about 1.9% in the twelve months, Mahindra CIE Automotive shareholders did even worse, losing 6.3%. 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. Longer term investors wouldn't be so upset, since they would have made 15%, 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. If you would like to research Mahindra CIE Automotive in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.