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Greaves Cotton Limited (NSE:GREAVESCOT) shareholders should be happy to see the share price up 16% in the last month. But that doesn't change the fact that the returns over the last year have trailed the market. Specifically, the stock returned 10% whereas the market is down, having returned (-9.0%) over the last year.
View our latest analysis for Greaves Cotton
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.
Unfortunately Greaves Cotton reported an EPS drop of 17% for the last year. The share price fall of 13% isn't as bad as the reduction in earnings per share. It may have been that the weak EPS was not as bad as some had feared.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It might be well worthwhile taking a look at our free report on Greaves Cotton's earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Greaves Cotton, it has a TSR of -10% for the last year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
While the broader market lost about 9.0% in the twelve months, Greaves Cotton shareholders did even worse, losing 10% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 4.6% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Is Greaves Cotton cheap compared to other companies? These 3 valuation measures might help you decide.
But note: Greaves Cotton 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).