What Type Of Returns Would Prakash Industries'(NSE:PRAKASH) Shareholders Have Earned If They Purchased Their SharesThree Years Ago?

Prakash Industries Limited (NSE:PRAKASH) shareholders should be happy to see the share price up 28% in the last quarter. But that is small recompense for the exasperating returns over three years. Tragically, the share price declined 72% in that time. So it's good to see it climbing back up. Perhaps the company has turned over a new leaf.

View our latest analysis for Prakash Industries

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...' 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.

Prakash Industries saw its EPS decline at a compound rate of 34% per year, over the last three years. The 35% average annual share price decline is remarkably close to the EPS decline. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. It seems like the share price is reflecting the declining earnings per share.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

Dive deeper into Prakash Industries' key metrics by checking this interactive graph of Prakash Industries's earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Prakash Industries' total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Prakash Industries' TSR, which was a 68% drop over the last 3 years, was not as bad as the share price return.

A Different Perspective

Prakash Industries provided a TSR of 6.6% over the last twelve months. But that was short of the market average. On the bright side, the longer term returns (running at about 11% a year, over half a decade) look better. 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 risks, for instance. Every company has them, and we've spotted 2 warning signs for Prakash Industries you should know about.

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 IN exchanges.

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