Despite lower earnings than five years ago, Mishra Dhatu Nigam (NSE:MIDHANI) investors are up 97% since then

Mishra Dhatu Nigam Limited (NSE:MIDHANI) shareholders might be concerned after seeing the share price drop 11% in the last quarter. On the bright side the share price is up over the last half decade. Unfortunately its return of 87% is below the market return of 156%.

Since the long term performance has been good but there's been a recent pullback of 8.1%, let's check if the fundamentals match the share price.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Mishra Dhatu Nigam's earnings per share are down 4.0% per year, despite strong share price performance over five years.

By glancing at these numbers, we'd posit that the decline in earnings per share is not representative of how the business has changed over the years. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

The modest 0.2% dividend yield is unlikely to be propping up the share price. In contrast revenue growth of 8.4% per year is probably viewed as evidence that Mishra Dhatu Nigam 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).

We know that Mishra Dhatu Nigam has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling Mishra Dhatu Nigam stock, you should check out this free report showing analyst profit forecasts.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Mishra Dhatu Nigam the TSR over the last 5 years was 97%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Mishra Dhatu Nigam shareholders have received a total shareholder return of 11% over one year. And that does include the dividend. Having said that, the five-year TSR of 14% a year, is even better. Before deciding if you like the current share price, check how Mishra Dhatu Nigam scores on these 3 valuation metrics.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.