Investors in Fairfax India Holdings (TSE:FIH.U) have seen favorable returns of 66% over the past three years
By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. Just take a look at Fairfax India Holdings Corporation (TSE:FIH.U), which is up 66%, over three years, soundly beating the market return of 22% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 27%.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Check out our latest analysis for Fairfax India Holdings
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...' One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Over the last three years, Fairfax India Holdings failed to grow earnings per share, which fell 6.4% (annualized).
This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
The revenue drop of 26% is as underwhelming as some politicians. The only thing that's clear is there is low correlation between Fairfax India Holdings' share price and its historic fundamental data. Further research may be required!
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
It's good to see that Fairfax India Holdings has rewarded shareholders with a total shareholder return of 27% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 0.2% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
Fairfax India Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Canadian exchanges.
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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.
