Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. Unfortunately the Kalyani Forge Limited (NSE:KALYANIFRG) share price slid 42% over twelve months. That contrasts poorly with the market return of 4.0%. We note that it has not been easy for shareholders over three years, either; the share price is down 41% in that time. Furthermore, it's down 28% in about a quarter. That's not much fun for holders.

See our latest analysis for Kalyani Forge

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, Kalyani Forge had to report a 19% decline in EPS over the last year. This reduction in EPS is not as bad as the 42% share price fall. 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 9.54.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Kalyani Forge's total shareholder return (TSR) and its share price change, which we've covered above. 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. Dividends have been really beneficial for Kalyani Forge shareholders, and that cash payout explains why its total shareholder loss of 41%, over the last year, isn't as bad as the share price return.

A Different Perspective

Kalyani Forge shareholders are down 41% for the year (even including dividends) , but the market itself is up 4.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 9.3% over the last half decade. 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 Kalyani Forge cheap compared to other companies? These 3 valuation measures might help you decide.