Mahindra & Mahindra Financial Services (NSE:M&MFIN) shareholders notch a 2.5% CAGR over 5 years, yet earnings have been shrinking

Ideally, your overall portfolio should beat the market average. But even the best stock picker will only win with some selections. At this point some shareholders may be questioning their investment in Mahindra & Mahindra Financial Services Limited (NSE:M&MFIN), since the last five years saw the share price fall 35%.

The recent uptick of 4.6% could be a positive sign of things to come, so let's take a look at historical fundamentals.

View our latest analysis for Mahindra & Mahindra Financial Services

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Looking back five years, both Mahindra & Mahindra Financial Services' share price and EPS declined; the latter at a rate of 12% per year. This fall in the EPS is worse than the 8% compound annual share price fall. So the market may previously have expected a drop, or else it expects the situation will improve.

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

Dive deeper into Mahindra & Mahindra Financial Services' key metrics by checking this interactive graph of Mahindra & Mahindra Financial Services's earnings, revenue and cash flow.

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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Mahindra & Mahindra Financial Services, it has a TSR of 13% 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

Mahindra & Mahindra Financial Services shareholders gained a total return of 26% during the year. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 2% per year over five year. It is possible that returns will improve along with the business fundamentals. 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 2 warning signs for Mahindra & Mahindra Financial Services you should be aware of, and 1 of them is concerning.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.