The total return for Akzo Nobel India (NSE:AKZOINDIA) investors has risen faster than earnings growth over the last three years

Akzo Nobel India Limited (NSE:AKZOINDIA) shareholders might be concerned after seeing the share price drop 11% in the last quarter. But that shouldn't obscure the pleasing returns achieved by shareholders over the last three years. After all, the share price is up a market-beating 76% in that time.

In light of the stock dropping 6.1% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive three-year return.

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In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Akzo Nobel India was able to grow its EPS at 14% per year over three years, sending the share price higher. In comparison, the 21% per year gain in the share price outpaces the EPS growth. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It is quite common to see investors become enamoured with a business, after a few years of solid progress.

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

This free interactive report on Akzo Nobel India's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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 Akzo Nobel India the TSR over the last 3 years was 93%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Akzo Nobel India has rewarded shareholders with a total shareholder return of 39% in the last twelve months. That's including the dividend. That's better than the annualised return of 13% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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 1 warning sign for Akzo Nobel India you should be aware of.

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.