Nasdaq
華爾街日報Timken India (NSE:TIMKEN) sheds 5.4% this week, as yearly returns fall more in line with earnings growth
When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For example, the Timken India Limited (NSE:TIMKEN) share price has soared 133% in the last half decade. Most would be very happy with that. Unfortunately, though, the stock has dropped 5.4% over a week. However, this might be related to the overall market decline of 0.4% in a week.
Since the long term performance has been good but there's been a recent pullback of 5.4%, let's check if the fundamentals match the share price.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 half a decade, Timken India managed to grow its earnings per share at 23% a year. This EPS growth is higher than the 18% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. Of course, with a P/E ratio of 53.74, the market remains optimistic.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into Timken India's key metrics by checking this interactive graph of Timken India's 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). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Timken India's TSR for the last 5 years was 136%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's good to see that Timken India has rewarded shareholders with a total shareholder return of 18% in the last twelve months. That's including the dividend. However, that falls short of the 19% TSR per annum it has made for shareholders, each year, over five years. It's always interesting to track share price performance over the longer term. But to understand Timken India better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Timken India you should be aware of.
But note: Timken India 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 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.