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

If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But the last three years have been particularly tough on longer term Sundaram-Clayton Limited (NSE:SUNCLAYLTD) shareholders. Regrettably, they have had to cope with a 63% drop in the share price over that period. Unhappily, the share price slid 1.9% in the last week.

Check out our latest analysis for Sundaram-Clayton

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Sundaram-Clayton saw its EPS decline at a compound rate of 35% per year, over the last three years. In comparison the 28% compound annual share price decline isn't as bad as the EPS drop-off. 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).

It might be well worthwhile taking a look at our free report on Sundaram-Clayton's earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Sundaram-Clayton's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for Sundaram-Clayton shareholders, and that cash payout explains why its total shareholder loss of 62%, over the last 3 years, isn't as bad as the share price return.

A Different Perspective

Sundaram-Clayton shareholders are down 9.3% for the year, but the market itself is up 7.0%. 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 0.4% 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. 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. Take risks, for example - Sundaram-Clayton has 3 warning signs (and 2 which don't sit too well with us) we think you should know about.

We will like Sundaram-Clayton better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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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