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Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Investors in Max Ventures and Industries Limited (NSE:MAXVIL) have tasted that bitter downside in the last year, as the share price dropped 23%. That's well bellow the market return of -1.9%. At least the damage isn't so bad if you look at the last three years, since the stock is down 16% in that time.
Check out our latest analysis for Max Ventures and Industries
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. 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.
During the last year Max Ventures and Industries grew its earnings per share, moving from a loss to a profit.
Earnings per share growth rates aren't particularly useful for comparing with the share price, when a company has moved from loss to profit. So it makes sense to check out some other factors.
Max Ventures and Industries's revenue is actually up 57% over the last year. 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.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
If you are thinking of buying or selling Max Ventures and Industries stock, you should check out this FREE detailed report on its balance sheet.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Max Ventures and Industries's total shareholder return (TSR) and its share price change, which we've covered above. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Max Ventures and Industries hasn't been paying dividends, but its TSR of -23% exceeds its share price return of -23%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
Max Ventures and Industries shareholders are down 23% for the year, falling short of the market return. Meanwhile, the broader market slid about 1.9%, likely weighing on the stock. The three-year loss of 4.5% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Warren Buffett famously said he likes to 'buy when there is blood on the streets', he also focusses on high quality stocks with solid prospects. Before forming an opinion on Max Ventures and Industries you might want to consider these 3 valuation metrics.