Despite delivering investors losses of 10% over the past 3 years, Kotak Mahindra Bank (NSE:KOTAKBANK) has been growing its earnings

As an investor its worth striving to ensure your overall portfolio beats the market average. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that's been the case for longer term Kotak Mahindra Bank Limited (NSE:KOTAKBANK) shareholders, since the share price is down 10% in the last three years, falling well short of the market return of around 55%.

The recent uptick of 3.1% could be a positive sign of things to come, so let's take a look at historical fundamentals.

View our latest analysis for Kotak Mahindra Bank

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the unfortunate three years of share price decline, Kotak Mahindra Bank actually saw its earnings per share (EPS) improve by 30% per year. 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). Alternatively, growth expectations may have been unreasonable in the past.

It's strange to see such muted share price performance despite sustained growth. Perhaps a clue lies in other metrics. Therefore, we should look at some other metrics to try to understand why the market is disappointed.

With a rather small yield of just 0.1% we doubt that the stock's share price is based on its dividend. Revenue is actually up 20% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating Kotak Mahindra Bank further; while we may be missing something on this analysis, there might also be an opportunity.

You can see below how earnings and revenue have changed over time (discover 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. This free report showing analyst forecasts should help you form a view on Kotak Mahindra Bank

A Different Perspective

Kotak Mahindra Bank shareholders are up 1.1% for the year (even including dividends). But that was short of the market average. If we look back over five years, the returns are even better, coming in at 1.8% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. It's always interesting to track share price performance over the longer term. But to understand Kotak Mahindra Bank better, we need to consider many other factors. Take risks, for example - Kotak Mahindra Bank has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

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 Indian exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.