Ujjivan Small Finance Bank (NSE:UJJIVANSFB) pulls back 17% this week, but still delivers shareholders stellar 26% CAGR over 3 years

The Ujjivan Small Finance Bank Limited (NSE:UJJIVANSFB) share price has had a bad week, falling 17%. But that doesn't change the fact that the returns over the last three years have been pleasing. In fact, the company's share price bested the return of its market index in that time, posting a gain of 86%.

In light of the stock dropping 17% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive three-year return.

See our latest analysis for Ujjivan Small Finance Bank

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 three years of share price growth, Ujjivan Small Finance Bank moved from a loss to profitability. That would generally be considered a positive, so we'd expect the share price to be up.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It is of course excellent to see how Ujjivan Small Finance Bank has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Ujjivan Small Finance Bank's financial health with this free report on its balance sheet.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Ujjivan Small Finance Bank the TSR over the last 3 years was 100%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Ujjivan Small Finance Bank shareholders are down 38% for the year (even including dividends), but the market itself is up 2.8%. 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 6% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 1 warning sign for Ujjivan Small Finance Bank you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.