While it may not be enough for some shareholders, we think it is good to see the Rupa & Company Limited (NSE:RUPA) share price up 13% in a single quarter. But that is small recompense for the exasperating returns over three years. In that time, the share price dropped 68%. So it’s good to see it climbing back up. After all, could be that the fall was overdone.
See our latest analysis for Rupa
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Rupa saw its EPS decline at a compound rate of 5.1% per year, over the last three years. The share price decline of 31% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It’s probably worth noting that the CEO is paid less than the median at similar sized 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. This free interactive report on Rupa’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 Rupa’s share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Rupa’s TSR, which was a 67% drop over the last 3 years, was not as bad as the share price return.
A Different Perspective
We regret to report that Rupa shareholders are down 28% for the year (even including dividends) . Unfortunately, that’s worse than the broader market decline of 3.5%. 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 13% per year over five years. We realise that Baron Rothschild 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 business. 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. For example, we’ve discovered 2 warning signs for Rupa that you should be aware of before investing here.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IN exchanges.
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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. 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.
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