Even though Tanla Platforms (NSE:TANLA) has lost ₹4.8b market cap in last 7 days, shareholders are still up 919% over 5 years

Tanla Platforms Limited (NSE:TANLA) shareholders might understandably be very concerned that the share price has dropped 39% in the last quarter. But that does not change the realty that the stock's performance has been terrific, over five years. To be precise, the stock price is 878% higher than it was five years ago, a wonderful performance by any measure. So we don't think the recent decline in the share price means its story is a sad one. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price. Unfortunately not all shareholders will have held it for five years, so spare a thought for those caught in the 71% decline over the last three years: that's a long time to wait for profits. We love happy stories like this one. The company should be really proud of that performance!

Since the long term performance has been good but there's been a recent pullback of 7.6%, let's check if the fundamentals match the share price.

Check out our latest analysis for Tanla Platforms

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 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.

During the five years of share price growth, Tanla Platforms moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. In fact, the Tanla Platforms stock price is 71% lower in the last three years. During the same period, EPS grew by 1.5% each year. So there seems to be a mismatch between the positive EPS growth and the change in the share price, which is down -34% per year.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

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

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Tanla Platforms, it has a TSR of 919% 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

Tanla Platforms shareholders are down 50% for the year (even including dividends), but the market itself is up 3.0%. 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 59%, 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. It's always interesting to track share price performance over the longer term. But to understand Tanla Platforms better, we need to consider many other factors. For instance, we've identified 1 warning sign for Tanla Platforms that you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.