Pulling back 7.8% this week, PNB Housing Finance's NSE:PNBHOUSING) five-year decline in earnings may be coming into investors focus

PNB Housing Finance Limited (NSE:PNBHOUSING) shareholders might be concerned after seeing the share price drop 17% in the last quarter. But that scarcely detracts from the really solid long term returns generated by the company over five years. In fact, the share price is 107% higher today. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. Ultimately business performance will determine whether the stock price continues the positive long term trend.

Although PNB Housing Finance has shed ₹20b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

View our latest analysis for PNB Housing Finance

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...' 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.

During five years of share price growth, PNB Housing Finance actually saw its EPS drop 4.1% per year.

So it's hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. Therefore, it's worth taking a look at other metrics to try to understand the share price movements.

On the other hand, PNB Housing Finance's revenue is growing nicely, at a compound rate of 9.8% over the last five years. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. If you are thinking of buying or selling PNB Housing Finance stock, you should check out this free report showing analyst profit forecasts.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between PNB Housing Finance's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that PNB Housing Finance's TSR of 150% over the last 5 years is better than the share price return.

A Different Perspective

PNB Housing Finance provided a TSR of 10% over the last twelve months. But that return falls short of the market. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 20% over five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with PNB Housing Finance , and understanding them should be part of your investment process.

We will like PNB Housing Finance better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.