Shareholders in Piramal Enterprises (NSE:PEL) have lost 40%, as stock drops 10% this past week

Many investors define successful investing as beating the market average over the long term. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term Piramal Enterprises Limited (NSE:PEL) shareholders have had that experience, with the share price dropping 67% in three years, versus a market return of about 80%. And the share price decline continued over the last week, dropping some 10%. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

With the stock having lost 10% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

See our latest analysis for Piramal Enterprises

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

Piramal Enterprises saw its share price decline over the three years in which its EPS also dropped, falling to a loss. Due to the loss, it's not easy to use EPS as a reliable guide to the business. But it's safe to say we'd generally expect the share price to be lower as a result!

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

Dive deeper into Piramal Enterprises' key metrics by checking this interactive graph of Piramal Enterprises'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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Piramal Enterprises the TSR over the last 3 years was -40%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Piramal Enterprises shareholders are down 16% for the year (even including dividends), but the market itself is up 43%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.9% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Even so, be aware that Piramal Enterprises is showing 2 warning signs in our investment analysis , you should know about...

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 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.