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Even the best stock pickers will make plenty of bad investments. And there's no doubt that Infibeam Avenues Limited (NSE:INFIBEAM) stock has had a really bad year. In that relatively short period, the share price has plunged 70%. We note that it has not been easy for shareholders over three years, either; the share price is down 34% in that time. On the other hand, we note it's up 8.6% in about a month. But this could be related to good market conditions, with stocks up around 3.6% during the period.
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 unfortunate twelve months during which the Infibeam Avenues share price fell, it actually saw its earnings per share (EPS) improve by 43%. It's quite possible that growth expectations may have been unreasonable in the past. It's surprising to see the share price fall so much, despite the improved EPS. So it's easy to justify a look at some other metrics.
Given the yield is quite low, at 0.4%, we doubt the dividend can shed much light on the share price. Infibeam Avenues 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.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
It is of course excellent to see how Infibeam Avenues has grown profits over the years, but the future is more important for shareholders. This free interactive report on Infibeam Avenues's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Infibeam Avenues shareholders are down 70% for the year (even including dividends), but the broader market is up 0.3%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. The three-year loss of 13% 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. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
We will like Infibeam Avenues better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IN exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.