Despite Shriram Transport Finance (NSE: SRTRANSFIN) earnings trend downward, the stock is up 5.3%, bringing year-on-year gains to 119%

When you buy shares in a company, there is always a risk that the price will drop to zero. But when you choose a business that is truly successful, you can Make more than 100%. For example, the Shriram Transport Finance Company Limited (NSE: SRTRANSFIN) The stock price has more than doubled in just one year, up 116%. Another good news is that the share price has climbed 9.0% in thirty days. But the price may have benefited from a buoyant market, as stocks have gained 4.7% over the past thirty days. Equally impressive, the stock is up 37% over three years, which also pleases long-term shareholders.

The past week has turned out to be lucrative for investors at Shriram Transport Finance, so let’s see if fundamentals have driven the company’s year-over-year performance.

See our latest review for Shriram Transport Finance

To quote Buffett, “Ships will sail around the world but the Flat Earth Society will thrive. There will continue to be wide spreads between price and value in the market … ”By comparing earnings per share (EPS) and changes in stock prices over time, we can get a feel for the changes in investor attitudes towards a company over time.

Over the past twelve months, Shriram Transport Finance has indeed reduced its EPS by 4.2%.

We don’t think the decline in earnings per share is a good measure of activity over the past twelve months. It makes sense to check out some of the other fundamentals for an explanation of the rise in stock prices.

We doubt the modest 1.3% dividend yield is doing much to support the share price. However, the 6.0% annual revenue growth would help. Many companies are going through a phase where they have to forgo certain profits to stimulate business development, and sometimes it is for the best.

The company’s revenue and profits (over time) are shown in the image below (click to see exact numbers).

NSEI: SRTRANSFIN Revenue and Revenue Growth October 21, 2021

We are happy to report that the CEO is paid more modestly than most CEOs of companies with similar capitalization. But while CEO compensation is still worth checking out, the really important question is whether the company can increase profits in the future. You can see what analysts are predicting for Shriram Transport Finance in this interactive graph of future profit estimates.

What about dividends?

When considering investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. TSR is a yield calculation that takes into account the value of cash dividends (assuming any dividends received have been reinvested) and the calculated value of any discounted capital increase and spinoff. It’s fair to say that the TSR gives a more complete picture of dividend paying stocks. We note that for Shriram Transport Finance, the TSR over the past year was 119%, which is better than the share price return mentioned above. This is largely the result of his dividend payments!

A different perspective

It is good to see that Shriram Transport Finance has rewarded its shareholders with a total shareholder return of 119% over the past twelve months. Of course, this includes the dividend. This is better than the 7% annualized return over half a decade, which implies that the company has been doing better recently. Someone with an optimistic outlook might view the recent improvement in TSR as indicating that the business itself is improving over time. I find it very interesting to look at the long-term share price as an indicator of company performance. But to really understand better, we have to take other information into account as well. Concrete example: we have spotted 3 warning signs for Shriram Transport Finance you should be aware of it, and one of them doesn’t suit us very well.

If you would rather consult with another company – one with potentially superior finances – then don’t miss this free list of companies that have proven they can increase their profits.

Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks that currently trade on the IN exchanges.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.

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