While it may not be enough for some shareholders, we think it is good to see the Munjal Auto Industries Limited (NSE:MUNJALAU) share price up 16% in a single quarter. But that doesn't change the reality of under-performance over the last twelve months. In fact the stock is down 25% in the last year, well below the market return.
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 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.
Unfortunately Munjal Auto Industries reported an EPS drop of 31% for the last year. The share price fall of 25% isn't as bad as the reduction in earnings per share. It may have been that the weak EPS was not as bad as some had feared.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Munjal Auto Industries's key metrics by checking this interactive graph of Munjal Auto Industries's earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Munjal Auto Industries's TSR for the last year was -23%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Munjal Auto Industries shareholders are down 23% for the year (even including dividends) , but the market itself is up 7.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 1.8% 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. Is Munjal Auto Industries cheap compared to other companies? These 3 valuation measures might help you decide.
Of course Munjal Auto Industries may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IN exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
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