As an investor its worth striving to ensure your overall portfolio beats the market average. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term Shriram City Union Finance Limited (NSE:SHRIRAMCIT) shareholders, since the share price is down 36% in the last three years, falling well short of the market return of around 24%. The silver lining is that the stock is up 2.4% in about a week.
See our latest analysis for Shriram City Union Finance
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
Although the share price is down over three years, Shriram City Union Finance actually managed to grow EPS by 23% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or else the company was over-hyped in the past, and so its growth has disappointed. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
The modest 1.6% dividend yield is unlikely to be guiding the market view of the stock. With revenue flat over three years, it seems unlikely that the share price is reflecting the top line. We're not entirely sure why the share price is dropped, but it does seem likely investors have become less optimistic about the business.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We know that Shriram City Union Finance has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on Shriram City Union Finance
What about the Total Shareholder Return (TSR)?
We've already covered Shriram City Union Finance's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for Shriram City Union Finance shareholders, and that cash payout explains why its total shareholder loss of 34%, over the last 3 years, isn't as bad as the share price return.