The Mahanagar Gas (NSE:MGL) Share Price Is Up 13% And Shareholders Are Holding On

It's been a soft week for Mahanagar Gas Limited (NSE:MGL) shares, which are down 10%. While that might be a setback, it doesn't negate the nice returns received over the last twelve months. Looking at the full year, the company has easily bested an index fund by gaining 13%.

View our latest analysis for Mahanagar Gas

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 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.

During the last year Mahanagar Gas grew its earnings per share (EPS) by 13%. This EPS growth is reasonably close to the 13% increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. It makes intuitive sense that the share price and EPS would grow at similar rates.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on Mahanagar Gas' earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

We've already covered Mahanagar Gas' share price action, but we should also mention its total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Dividends have been really beneficial for Mahanagar Gas shareholders, and that cash payout contributed to why its TSR of 14%, over the last year, is better than the share price return.

A Different Perspective

Pleasingly, Mahanagar Gas' total shareholder return last year was 14%. And yes, that does include the dividend. What is absolutely clear is that is far preferable to the dismal 1.4% average annual loss suffered over the last three years. It could well be that the business has turned around -- or else regained the confidence of investors. 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 1 warning sign for Mahanagar Gas 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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