3M India's (NSE:3MINDIA) five-year earnings growth trails the 9.1% YoY shareholder returns

Simply Wall St · 04/15 05:21

If you buy and hold a stock for many years, you'd hope to be making a profit. Furthermore, you'd generally like to see the share price rise faster than the market. But 3M India Limited (NSE:3MINDIA) has fallen short of that second goal, with a share price rise of 46% over five years, which is below the market return. Unfortunately the share price is down 0.6% in the last year.

Since the stock has added ₹18b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Our free stock report includes 1 warning sign investors should be aware of before investing in 3M India. Read for free now.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 five years of share price growth, 3M India achieved compound earnings per share (EPS) growth of 12% per year. The EPS growth is more impressive than the yearly share price gain of 8% over the same period. So it seems the market isn't so enthusiastic about the stock these days. Of course, with a P/E ratio of 56.50, the market remains optimistic.

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

earnings-per-share-growth
NSEI:3MINDIA Earnings Per Share Growth April 15th 2025

It is of course excellent to see how 3M India has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling 3M India stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of 3M India, it has a TSR of 55% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that 3M India has rewarded shareholders with a total shareholder return of 1.1% in the last twelve months. That's including the dividend. Having said that, the five-year TSR of 9% a year, is even better. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 1 warning sign for 3M India that you should be aware of.

We will like 3M India better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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