IndiaMART InterMESH (NSE:INDIAMART) sheds 3.5% this week, as yearly returns fall more in line with earnings growth

It hasn't been the best quarter for IndiaMART InterMESH Limited (NSE:INDIAMART) shareholders, since the share price has fallen 14% in that time. But at least the stock is up over the last five years. In that time, it is up 80%, which isn't bad, but is below the market return of 211%. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 23% decline over the last twelve months.

In light of the stock dropping 3.5% 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 five-year return.

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In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Over half a decade, IndiaMART InterMESH managed to grow its earnings per share at 28% a year. This EPS growth is higher than the 13% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that IndiaMART InterMESH has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts .

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. In the case of IndiaMART InterMESH, it has a TSR of 83% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We regret to report that IndiaMART InterMESH shareholders are down 22% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 3.2%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 13%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand IndiaMART InterMESH better, we need to consider many other factors. Take risks, for example - IndiaMART InterMESH has 2 warning signs we think 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.