L&T Finance Holdings' (NSE:L&TFH) Stock Price Has Reduced 46% In The Past Three Years

It is a pleasure to report that the L&T Finance Holdings Limited (NSE:L&TFH) is up 44% in the last quarter. But that doesn't change the fact that the returns over the last three years have been less than pleasing. Truth be told the share price declined 46% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

View our latest analysis for L&T Finance Holdings

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.

Although the share price is down over three years, L&T Finance Holdings actually managed to grow EPS by 1.9% per year in that time. 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). Or else the company was over-hyped in the past, and so its growth has disappointed.

It's pretty reasonable to suspect the market was previously to bullish on the stock, and has since moderated expectations. However, taking a look at other business metrics might shed a bit more light on the share price action.

The modest 1.0% dividend yield is unlikely to be guiding the market view of the stock. We note that, in three years, revenue has actually grown at a 28% annual rate, so that doesn't seem to be a reason to sell shares. This analysis is just perfunctory, but it might be worth researching L&T Finance Holdings more closely, as sometimes stocks fall unfairly. This could present an opportunity.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

Investors in L&T Finance Holdings had a tough year, with a total loss of 22% (including dividends), against a market gain of about 17%. 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. On the bright side, long term shareholders have made money, with a gain of 9% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand L&T Finance Holdings better, we need to consider many other factors. For example, we've discovered 3 warning signs for L&T Finance Holdings (1 is a bit unpleasant!) that you should be aware of before investing here.

Of course L&T Finance Holdings 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.

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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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