The simplest way to invest in stocks is to buy exchange traded funds. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the The Investment Trust of India Limited (NSE:THEINVEST) share price is 38% higher than it was a year ago, much better than the market return of around 26% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! Zooming out, the stock is actually down 19% in the last three years.
Since the stock has added ₹823m to its market cap in the past week alone, let’s see if underlying performance has been driving long-term returns.
Check out our latest analysis for Investment Trust of India
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 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 last year Investment Trust of India grew its earnings per share, moving from a loss to a profit.
When a company has just transitioned to profitability, earnings per share growth is not always the best way to look at the share price action.
Investment Trust of India’s revenue actually dropped 12% over last year. So the fundamental metrics don’t provide an obvious explanation for the share price gain.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Take a more thorough look at Investment Trust of India’s financial health with this free report on its balance sheet.
A Different Perspective
It’s good to see that Investment Trust of India has rewarded shareholders with a total shareholder return of 38% in the last twelve months. That certainly beats the loss of about 5% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It’s always interesting to track share price performance over the longer term. But to understand Investment Trust of India better, we need to consider many other factors. Like risks, for instance. Every company has them, and we’ve spotted 4 warning signs for Investment Trust of India (of which 2 make us uncomfortable!) you should know about.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Indian exchanges.
Valuation is complex, but we’re helping make it simple.
Find out whether Investment Trust of India is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
