Three-year shareholder yields and company earnings continue to decline, with L&T Finance Holdings (NSE: L & TFH) stock falling further 8.1% last week


The truth is, if you invest long enough, you are going to end up with losing stocks. But the long-term shareholders of L&T Finance Holdings Limited (NSE: L & TFH) have had a bad patch over the past three years. They could therefore be moved by the collapse of the share price of 57%, at this time.

After losing 8.1% last week, it’s worth studying the fundamentals of the business to see what we can infer from past performance.

Check out our latest review for L&T Finance Holdings

To paraphrase Benjamin Graham: In the short term the market is a voting machine, but in the long term it is a weighing machine. An imperfect but straightforward way to consider how a company’s market perception has changed is to compare the evolution of earnings per share (EPS) with the movement of the share price.

L&T Finance Holdings has seen its EPS decline at a compound rate of 19% per annum over the past three years. The 25% drop in the share price is actually bigger than the slide in EPS. It is therefore likely that the fall in EPS disappointed the market, leaving investors hesitant to buy.

The image below shows how EPS has tracked over time (if you click on the image you can see more detail).

NSEI: L & TFH Growth in earnings per share August 24, 2021

Dive deeper into the key metrics of L&T Finance Holdings by viewing this interactive graph of L&T Finance Holdings earnings, income and cash flow.

What about the Total Shareholder Return (TSR)?

Investors should note that there is a difference between the Total Shareholder Return (TSR) of L&T Finance Holdings and the change in its share price, which we have covered above. Arguably, TSR is a more comprehensive return calculation because it takes into account the value of dividends (as if they were reinvested), as well as the hypothetical value of any discounted capital that has been offered to shareholders. L&T Finance Holdings’ TSR was a loss of 53% for the 3 years. It wasn’t as bad as its stock price performance because it paid dividends.

A different perspective

L&T Finance Holdings shareholders achieved a total return of 23% during the year. But this yield is lower than the market. On the bright side, it’s still a gain, and it’s certainly better than the roughly 1.9% annual loss suffered for half a decade. So this could be a sign that the company has turned its fortune. It is always interesting to follow the evolution of stock prices over the long term. But to better understand L&T Finance Holdings, there are many other factors that we need to consider. Concrete example: we have spotted 4 warning signs for L&T Finance Holdings you should be aware of it, and one of them doesn’t suit us very well.

Sure L&T Finance Holdings may not be the best stock to buy. So you might want to see this free collection of growth stocks.

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

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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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