Munjal Showa's (NSE:MUNJALSHOW) Stock Price Has Reduced43% In The Past Three Years

Munjal Showa Limited (NSE:MUNJALSHOW) shareholders will doubtless be very grateful to see the share price up 72% in the last quarter. But that doesn't help the fact that the three year return is less impressive. In fact, the share price is down 43% in the last three years, falling well short of the market return.

See our latest analysis for Munjal Showa

There is no denying that markets are sometimes efficient, but prices do not always reflect 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.

Munjal Showa saw its EPS decline at a compound rate of 31% per year, over the last three years. This fall in the EPS is worse than the 17% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Dive deeper into Munjal Showa's key metrics by checking this interactive graph of Munjal Showa's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Munjal Showa's TSR for the last 3 years was -40%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market gained around 5.6% in the last year, Munjal Showa shareholders lost 2.3% (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. However, the loss over the last year isn't as bad as the 3.3% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. 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. For instance, we've identified 5 warning signs for Munjal Showa (1 is a bit concerning) that you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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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