Did Business Growth Power Arman Financial Services' (NSE:ARMANFIN) Share Price Gain of 139%?

It might be of some concern to shareholders to see the Arman Financial Services Limited (NSE:ARMANFIN) share price down 12% in the last month. In contrast, the return over three years has been impressive. The share price marched upwards over that time, and is now 139% higher than it was. After a run like that some may not be surprised to see prices moderate. The thing to consider is whether the underlying business is doing well enough to support the current price.

View our latest analysis for Arman Financial Services

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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, Arman Financial Services achieved compound earnings per share growth of 91% per year. The average annual share price increase of 34% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat. We'd venture the lowish P/E ratio of 7.83 also reflects the negative sentiment around the stock.

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

It might be well worthwhile taking a look at our free report on Arman Financial Services' earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

We've already covered Arman Financial Services' share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for Arman Financial Services shareholders, and that cash payout contributed to why its TSR of 142%, over the last 3 years, is better than the share price return.

A Different Perspective

Pleasingly, Arman Financial Services' total shareholder return last year was 20%. The TSR has been even better over three years, coming in at 34% per year. It's always interesting to track share price performance over the longer term. But to understand Arman Financial Services better, we need to consider many other factors. Even so, be aware that Arman Financial Services is showing 5 warning signs in our investment analysis , and 1 of those is a bit unpleasant...

But note: Arman Financial Services may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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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