Would Shareholders Who Purchased KSB's(NSE:KSB) Stock Three Years Be Happy With The Share price Today?

While it may not be enough for some shareholders, we think it is good to see the KSB Limited (NSE:KSB) share price up 14% 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 24% in the last three years, significantly under-performing the market.

See our latest analysis for KSB

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 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, KSB actually managed to grow EPS by 11% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or else the company was over-hyped in the past, and so its growth has disappointed.

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

The modest 1.6% dividend yield is unlikely to be guiding the market view of the stock. With revenue flat over three years, it seems unlikely that the share price is reflecting the top line. We're not entirely sure why the share price is dropped, but it does seem likely investors have become less optimistic about the business.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We know that KSB has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling KSB stock, you should check out this free report showing analyst profit forecasts.

What about the Total Shareholder Return (TSR)?

We've already covered KSB's 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 KSB shareholders, and that cash payout explains why its total shareholder loss of 23%, over the last 3 years, isn't as bad as the share price return.

A Different Perspective

Investors in KSB had a tough year, with a total loss of 15% (including dividends), against a market gain of about 4.4%. 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 2.6% 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. It's always interesting to track share price performance over the longer term. But to understand KSB better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with KSB .

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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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