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Agarwal Industrial Corporation Limited (NSE:AGARIND) shareholders should be happy to see the share price up 10% in the last month. But that isn't much consolation to those who have suffered through the declines of the last year. Like a receding glacier in a warming world, the share price has melted 55% in that period. It's not that amazing to see a bounce after a drop like that. Arguably, the fall was overdone.
See our latest analysis for Agarwal Industrial
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.
During the unfortunate twelve months during which the Agarwal Industrial share price fell, it actually saw its earnings per share (EPS) improve by 79%. It could be that the share price was previously over-hyped. It's surprising to see the share price fall so much, despite the improved EPS. So it's well worth checking out some other metrics, too.
With a low yield of 1.4% we doubt that the dividend influences the share price much. Agarwal Industrial managed to grow revenue over the last year, which is usually a real positive. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Agarwal Industrial'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. Its history of dividend payouts mean that Agarwal Industrial's TSR, which was a 55% drop over the last year, was not as bad as the share price return.
A Different Perspective
We regret to report that Agarwal Industrial shareholders are down 55% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 12%. 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. On the bright side, long term shareholders have made money, with a gain of 8.0% per year over half a decade. 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. Before deciding if you like the current share price, check how Agarwal Industrial scores on these 3 valuation metrics.