Pokarna Limited (NSE:POKARNA) shareholders might be concerned after seeing the share price drop 21% in the last quarter. But in three years the returns have been great. Indeed, the share price is up a very strong 238% in that time. To some, the recent share price pullback wouldn't be surprising after such a good run. The thing to consider is whether the underlying business is doing well enough to support the current price.
Since the long term performance has been good but there's been a recent pullback of 13%, let's check if the fundamentals match the share price.
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 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.
During the three years of share price growth, Pokarna actually saw its earnings per share (EPS) drop 4.1% per year.
Companies are not always focussed on EPS growth in the short term, and looking at how the share price has reacted, we don't think EPS is the most important metric for Pokarna at the moment. Therefore, it makes sense to look into other metrics.
Languishing at just 0.1%, we doubt the dividend is doing much to prop up the share price. You can only imagine how long term shareholders feel about the declining revenue trend (slipping at 5.2% per year). The only thing that's clear is there is low correlation between Pokarna's share price and its historic fundamental data. Further research may be required!
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Pokarna's TSR for the last 3 years was 242%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Pokarna has rewarded shareholders with a total shareholder return of 131% in the last twelve months. That's including the dividend. That's better than the annualised return of 15% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 3 warning signs for Pokarna you should be aware of, and 2 of them are a bit concerning.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IN exchanges.
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.