A Look At L&T Finance Holdings' (NSE:L&TFH) Share Price Returns

This week we saw the L&T Finance Holdings Limited (NSE:L&TFH) share price climb by 11%. But that is small recompense for the exasperating returns over three years. Regrettably, the share price slid 67% in that period. So it's good to see it climbing back up. The rise has some hopeful, but turnarounds are often precarious.

See our latest analysis for L&T Finance Holdings

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Although the share price is down over three years, L&T Finance Holdings actually managed to grow EPS by 4.0% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.

It's pretty reasonable to suspect the market was previously to bullish on the stock, and has since moderated expectations. However, taking a look at other business metrics might shed a bit more light on the share price action.

With a rather small yield of just 1.4% we doubt that the stock's share price is based on its dividend. Revenue is actually up 34% over the three years, so the share price drop doesn't seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching L&T Finance Holdings more closely, as sometimes stocks fall unfairly. This could present an opportunity.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

L&T Finance Holdings is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling L&T Finance Holdings stock, you should check out this free report showing analyst consensus estimates for future profits.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between L&T Finance Holdings' total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for L&T Finance Holdings shareholders, and that cash payout explains why its total shareholder loss of 66%, over the last 3 years, isn't as bad as the share price return.

A Different Perspective

While the broader market gained around 6.7% in the last year, L&T Finance Holdings shareholders lost 19% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.3% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 3 warning signs for L&T Finance Holdings you should be aware of, and 1 of them is concerning.

We will like L&T Finance Holdings 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.

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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. 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.
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