How Much Did Cholamandalam Financial Holdings'(NSE:CHOLAHLDNG) Shareholders Earn From Share Price Movements Over The Last Three Years?

While it may not be enough for some shareholders, we think it is good to see the Cholamandalam Financial Holdings Limited (NSE:CHOLAHLDNG) share price up 20% in a single quarter. But that doesn't change the fact that the returns over the last three years have been less than pleasing. After all, the share price is down 28% in the last three years, significantly under-performing the market.

Check out our latest analysis for Cholamandalam Financial Holdings

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 unfortunate three years of share price decline, Cholamandalam Financial Holdings actually saw its earnings per share (EPS) improve by 15% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

With a rather small yield of just 0.2% we doubt that the stock's share price is based on its dividend. We note that, in three years, revenue has actually grown at a 25% annual rate, so that doesn't seem to be a reason to sell shares. This analysis is just perfunctory, but it might be worth researching Cholamandalam Financial Holdings more closely, as sometimes stocks fall unfairly. This could present an opportunity.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

We know that Cholamandalam Financial Holdings has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Cholamandalam Financial Holdings in this interactive graph of future profit estimates.

A Different Perspective

Cholamandalam Financial Holdings shareholders are down 14% for the year, (even including dividends), but the broader market is up 5.5%. 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 8% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 2 warning signs for Cholamandalam Financial Holdings you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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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