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華爾街日報Indian Metals and Ferro Alloys' (NSE:IMFA) earnings growth rate lags the 55% CAGR delivered to shareholders
It's been a soft week for Indian Metals and Ferro Alloys Limited (NSE:IMFA) shares, which are down 12%. But that does not change the realty that the stock's performance has been terrific, over five years. To be precise, the stock price is 662% higher than it was five years ago, a wonderful performance by any measure. So we don't think the recent decline in the share price means its story is a sad one. But the real question is whether the business fundamentals can improve over the long term. It really delights us to see such great share price performance for investors.
While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.
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 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, Indian Metals and Ferro Alloys achieved compound earnings per share (EPS) growth of 72% per year. This EPS growth is higher than the 50% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It might be well worthwhile taking a look at our free report on Indian Metals and Ferro Alloys' earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Indian Metals and Ferro Alloys' TSR for the last 5 years was 798%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's good to see that Indian Metals and Ferro Alloys has rewarded shareholders with a total shareholder return of 42% in the last twelve months. That's including the dividend. However, the TSR over five years, coming in at 55% per year, is even more impressive. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Indian Metals and Ferro Alloys , and understanding them should be part of your investment process.
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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Indian exchanges.
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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.