Shyam Century Ferrous (NSE:SHYAMCENT) shareholders notch a 54% CAGR over 3 years, yet earnings have been shrinking

Shyam Century Ferrous Limited (NSE:SHYAMCENT) shareholders might be concerned after seeing the share price drop 24% in the last quarter. But that doesn't change the fact that the returns over the last three years have been very strong. The share price marched upwards over that time, and is now 262% higher than it was. After a run like that some may not be surprised to see prices moderate. The thing to consider is whether the underlying business is doing well enough to support the current price.

The past week has proven to be lucrative for Shyam Century Ferrous investors, so let's see if fundamentals drove the company's three-year performance.

See our latest analysis for Shyam Century Ferrous

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. 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.

Over the last three years, Shyam Century Ferrous failed to grow earnings per share, which fell 7.5% (annualized).

This means it's unlikely the market is judging the company based on earnings growth. Therefore, we think it's worth considering other metrics as well.

The modest 1.5% dividend yield is unlikely to be propping up the share price. It could be that the revenue growth of 8.4% per year is viewed as evidence that Shyam Century Ferrous is growing. If the company is being managed for the long term good, today's shareholders might be right to hold on.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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 Shyam Century Ferrous the TSR over the last 3 years was 267%, 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

Shyam Century Ferrous shareholders gained a total return of 14% during the year. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 27% per year for five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. 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. Even so, be aware that Shyam Century Ferrous is showing 4 warning signs in our investment analysis , you should know about...

We will like Shyam Century Ferrous better if we see some big insider buys. While we wait, check out this free list of growing companies 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.

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.