Pulling back 10.0% this week, Mahindra Lifespace Developers' NSE:MAHLIFE) five-year decline in earnings may be coming into investors focus

Mahindra Lifespace Developers Limited (NSE:MAHLIFE) shareholders might understandably be very concerned that the share price has dropped 35% in the last quarter. But that scarcely detracts from the really solid long term returns generated by the company over five years. Indeed, the share price is up an impressive 285% in that time. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Of course, that doesn't necessarily mean it's cheap now.

Since the long term performance has been good but there's been a recent pullback of 10.0%, let's check if the fundamentals match the share price.

View our latest analysis for Mahindra Lifespace Developers

While Mahindra Lifespace Developers made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.

In the last 5 years Mahindra Lifespace Developers saw its revenue shrink by 3.2% per year. Given that scenario, we wouldn't have expected the share price to rise 31% per year, but that's what it did. It's a good reminder that expectations about the future, not the past history, always impact share prices. Still, this situation makes us a little wary of the stock.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We know that Mahindra Lifespace Developers has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Mahindra Lifespace Developers will earn in the future (free 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Mahindra Lifespace Developers, it has a TSR of 290% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Mahindra Lifespace Developers shareholders are down 42% for the year (even including dividends), but the market itself is up 0.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 31%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. For example, we've discovered 2 warning signs for Mahindra Lifespace Developers that you should be aware of before investing here.

Of course Mahindra Lifespace Developers may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.