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The DCM Shriram (NSE:DCMSHRIRAM) Share Price Has Gained 80% And Shareholders Are Hoping For More

Simply Wall St

The last three months have been tough on DCM Shriram Limited (NSE:DCMSHRIRAM) shareholders, who have seen the share price decline a rather worrying 32%. But don't let that distract from the very nice return generated over three years. To wit, the share price did better than an index fund, climbing 80% during that period.

See our latest analysis for DCM Shriram

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

During three years of share price growth, DCM Shriram achieved compound earnings per share growth of 40% per year. The average annual share price increase of 22% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock. We'd venture the lowish P/E ratio of 6.75 also reflects the negative sentiment around the stock.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

NSEI:DCMSHRIRAM Past and Future Earnings, October 5th 2019

We know that DCM Shriram has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling DCM Shriram stock, you should check out this FREE detailed report on its balance sheet.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of DCM Shriram, it has a TSR of 92% for the last 3 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

It's nice to see that DCM Shriram shareholders have received a total shareholder return of 8.1% over the last year. Of course, that includes the dividend. However, that falls short of the 14% TSR per annum it has made for shareholders, each year, over five years. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. Before spending more time on DCM Shriram it might be wise to click here to see if insiders have been buying or selling shares.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.