Does State Bank of India’s (NSE:SBIN) Share Price Gain of 27% Match Its Business Performance?

Investors can buy low cost index fund if they want to receive the average market return. But in any diversified portfolio of stocks, you’ll see some that fall short of the average. For example, the State Bank of India (NSE:SBIN) share price return of 27% over three years lags the market return in the same period. Looking at more recent returns, the stock is up 17% in a year.

View our latest analysis for State Bank of India

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 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.

State Bank of India became profitable within the last three years. That would generally be considered a positive, so we’d expect the share price to be up.

The company’s earnings per share (over time) are depicted in the image below.

NSEI:SBIN Past and Future Earnings, November 23rd 2019
NSEI:SBIN Past and Future Earnings, November 23rd 2019

We know that State Bank of India has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on State Bank of India’s balance sheet strength is a great place to start, if you want to investigate the stock further.

What about the Total Shareholder Return (TSR)?

Investors should note that there’s a difference between State Bank of India’s total shareholder return (TSR) and its share price change, which we’ve covered above. 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 State Bank of India’s TSR of 28% over the last 3 years is better than the share price return.

A Different Perspective

It’s nice to see that State Bank of India shareholders have received a total shareholder return of 17% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 1.3% per year), it would seem that the stock’s performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IN exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.

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. Thank you for reading.