The three-year decline in earnings might be taking its toll on PNB Housing Finance (NSE:PNBHOUSING) shareholders as stock falls 3.6% over the past week

While PNB Housing Finance Limited (NSE:PNBHOUSING) shareholders are probably generally happy, the stock hasn’t had particularly good run recently, with the share price falling 18% in the last quarter. In contrast, the return over three years has been impressive. Indeed, the share price is up a very strong 170% in that time. So the recent fall in the share price should be viewed in that context. The fundamental business performance will ultimately dictate whether the top is in, or if this is a stellar buying opportunity.

In light of the stock dropping 3.6% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company’s positive three-year return.

View our latest analysis for PNB Housing 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.

Over the last three years, PNB Housing Finance failed to grow earnings per share, which fell 22% (annualized).

Thus, it seems unlikely that the market is focussed on EPS growth at the moment. Therefore, we think it’s worth considering other metrics as well.

You can only imagine how long term shareholders feel about the declining revenue trend (slipping at 5.7% per year). What’s clear is that historic earnings and revenue aren’t matching up with the share price action, very well. So you might have to dig deeper to get a grasp of the situation

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

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NSEI:PNBHOUSING Earnings and Revenue Growth May 15th 2023

We know that PNB Housing Finance has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for PNB Housing Finance in this interactive graph of future profit estimates.

What About The Total Shareholder Return (TSR)?

We’ve already covered PNB Housing 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. Its history of dividend payouts mean that PNB Housing Finance’s TSR of 294% over the last 3 years is better than the share price return.

A Different Perspective

We’re pleased to report that PNB Housing Finance shareholders have received a total shareholder return of 106% over one year. That certainly beats the loss of about 8% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Like risks, for instance. Every company has them, and we’ve spotted 3 warning signs for PNB Housing Finance (of which 2 don’t sit too well with us!) you should know about.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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

Valuation is complex, but we’re helping make it simple.

Find out whether PNB Housing Finance is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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