While Muthoot Capital Services Limited (NSE:MUTHTFN) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 26% in the last quarter. But that doesn't undermine the rather lovely longer-term return, if you measure over the last three years. In fact, the share price is up a full 190% compared to three years ago. To some, the recent share price pullback wouldn't be surprising after such a good run. If the business can perform well for years to come, then the recent drop could be an opportunity.
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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Muthoot Capital Services was able to grow its EPS at 41% per year over three years, sending the share price higher. This EPS growth is remarkably close to the 43% average annual increase in the share price. This observation indicates that the market's attitude to the business hasn't changed all that much. Rather, the share price has approximately tracked EPS growth.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It is of course excellent to see how Muthoot Capital Services has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Muthoot Capital Services's financial health with this free report on its balance sheet.
A Different Perspective
Muthoot Capital Services shareholders are down 53% for the year, falling short of the market return. Meanwhile, the broader market slid about 9.7%, likely weighing on the stock. Investors are up over three years, booking 43% per year, much better than the more recent returns. Sometimes when a good quality long term winner has a weak period, it's turns out to be an opportunity, but you really need to be sure that the quality is there. If you would like to research Muthoot Capital Services in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
But note: Muthoot Capital Services may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IN exchanges.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.