Pulling back 10% this week, Deccan Cements' NSE:DECCANCE) five-year decline in earnings may be coming into investors focus

Deccan Cements Limited (NSE:DECCANCE) shareholders might be concerned after seeing the share price drop 14% in the last month. But in stark contrast, the returns over the last half decade have impressed. Indeed, the share price is up an impressive 248% in that time. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Ultimately business performance will determine whether the stock price continues the positive long term trend.

Since the long term performance has been good but there's been a recent pullback of 10%, let's check if the fundamentals match the share price.

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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.

Deccan Cements' earnings per share are down 49% per year, despite strong share price performance over five years. The impact of extraordinary items on earnings, in the last year, partially explain the diversion.

This means it's unlikely the market is judging the company based on earnings growth. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.

We doubt the modest 0.4% dividend yield is attracting many buyers to the stock. In contrast revenue growth of 4.2% per year is probably viewed as evidence that Deccan Cements is growing, a real positive. In that case, the company may be sacrificing current earnings per share to drive growth.

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

If you are thinking of buying or selling Deccan Cements stock, you should check out this FREE detailed report on its balance sheet .

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Deccan Cements' TSR for the last 5 years was 258%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Deccan Cements shareholders have received a total shareholder return of 16% over one year. Of course, that includes the dividend. However, the TSR over five years, coming in at 29% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. 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. To that end, you should learn about the 6 warning signs we've spotted with Deccan Cements (including 2 which are significant) .

We will like Deccan Cements 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.