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It's easy to match the overall market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. For example, the Mirza International Limited (NSE:MIRZAINT) share price is down 43% in the last year. That contrasts poorly with the market return of -12%. Notably, shareholders had a tough run over the longer term, too, with a drop of 40% in the last three years. The silver lining is that the stock is up 1.8% in about a week.
See our latest analysis for Mirza International
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Unfortunately Mirza International reported an EPS drop of 48% for the last year. This proportional reduction in earnings per share isn't far from the 43% decrease in the share price. Given the lower EPS we might have expected investors to lose confidence in the stock, but that doesn't seemed to have happened. Instead, the change in the share price seems to reduction in earnings per share, alone.
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)?
We'd be remiss not to mention the difference between Mirza International's total shareholder return (TSR) and its share price return. 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 Mirza International's TSR, which was a 42% drop over the last year, was not as bad as the share price return.
A Different Perspective
We regret to report that Mirza International shareholders are down 42% 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 5.8% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Is Mirza International cheap compared to other companies? These 3 valuation measures might help you decide.