Mahindra & Mahindra Financial Services (NSE:M&MFIN) delivers shareholders respectable 22% CAGR over 3 years, surging 4.8% in the last week alone

It hasn't been the best quarter for Mahindra & Mahindra Financial Services Limited (NSE:M&MFIN) shareholders, since the share price has fallen 13% in that time. But we wouldn't complain about the gain over the last three years. It beat the market return of 65% in that time, gaining 73%.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

See our latest analysis for Mahindra & Mahindra 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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During three years of share price growth, Mahindra & Mahindra Financial Services moved from a loss to profitability. So we would expect a higher share price over the period.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Mahindra & Mahindra Financial Services the TSR over the last 3 years was 83%, 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

Mahindra & Mahindra Financial Services shareholders gained a total return of 1.3% during the year. But that return falls short of the market. On the bright side, the longer term returns (running at about 7% a year, over half a decade) look better. 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 Mahindra & Mahindra Financial Services better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Mahindra & Mahindra Financial Services (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.

Of course Mahindra & Mahindra Financial Services 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 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.