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In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But if you try your hand at stock picking, your risk returning less than the market. Unfortunately, that's been the case for longer term Indian Terrain Fashions Limited (NSE:INDTERRAIN) shareholders, since the share price is down 45% in the last three years, falling well short of the market return of around 25%. The more recent news is of little comfort, with the share price down 39% in a year. Shareholders have had an even rougher run lately, with the share price down 22% in the last 90 days.
See our latest analysis for Indian Terrain Fashions
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 three years that the share price fell, Indian Terrain Fashions's earnings per share (EPS) dropped by 8.2% each year. This reduction in EPS is slower than the 18% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Indian Terrain Fashions's earnings, revenue and cash flow.
A Different Perspective
While the broader market gained around 1.2% in the last year, Indian Terrain Fashions shareholders lost 39%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 1.8%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Indian Terrain Fashions by clicking this link.
Indian Terrain Fashions is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.