Investors more bullish on Sanofi India (NSE:SANOFI) this week as stock ascends 5.6%, despite earnings trending downwards over past year

It's understandable if you feel frustrated when a stock you own sees a lower share price. But in the short term the market is a voting machine, and the share price movements may not reflect the underlying business performance. The Sanofi India Limited (NSE:SANOFI) is down 22% over a year, but the total shareholder return is 48% once you include the dividend. That's better than the market which returned 30% over the last year. Looking at the longer term, the stock is down 19% over three years. But it's up 5.6% in the last week. The buoyant market could have helped drive the share price pop, since stocks are up 2.9% in the same period.

While the stock has risen 5.6% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

Check out our latest analysis for Sanofi India

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.

Unhappily, Sanofi India had to report a 11% decline in EPS over the last year. This reduction in EPS is not as bad as the 22% share price fall. This suggests the EPS fall has made some shareholders more nervous about the business.

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

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Sanofi India, it has a TSR of 48% for the last 1 year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Sanofi India shareholders have received a total shareholder return of 48% over the last year. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 18% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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 2 warning signs we've spotted with Sanofi India (including 1 which can't be ignored) .

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.