Stock Analysis

Reflecting on Mahindra & Mahindra Financial Services'(NSE:M&MFIN) Total Shareholder Returns Over The Last Three Years

NSEI:M&MFIN
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It is doubtless a positive to see that the Mahindra & Mahindra Financial Services Limited (NSE:M&MFIN) share price has gained some 43% in the last three months. But that cannot eclipse the less-than-impressive returns over the last three years. Truth be told the share price declined 53% 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 Mahindra & Mahindra Financial Services

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Although the share price is down over three years, Mahindra & Mahindra Financial Services actually managed to grow EPS by 15% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

Revenue is actually up 14% over the three years, so the share price drop doesn't seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching Mahindra & Mahindra Financial Services more closely, as sometimes stocks fall unfairly. This could present an opportunity.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
NSEI:M&MFIN Earnings and Revenue Growth February 15th 2021

If you are thinking of buying or selling Mahindra & Mahindra Financial Services stock, you should check out this FREE detailed report on its balance sheet.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Mahindra & Mahindra Financial Services' total shareholder return (TSR) and its share price return. 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. Mahindra & Mahindra Financial Services' TSR of was a loss of 21% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

Investors in Mahindra & Mahindra Financial Services had a tough year, with a total loss of 13%, against a market gain of about 26%. 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 10% per year over half a decade. 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 Mahindra & Mahindra Financial Services better, we need to consider many other factors. Case in point: We've spotted 6 warning signs for Mahindra & Mahindra Financial Services you should be aware of, and 2 of them are significant.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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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