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For many, the main point of investing in the stock market is to achieve spectacular returns. And highest quality companies can see their share prices grow by huge amounts. Just think about the savvy investors who held Minda Corporation Limited (NSE:MINDACORP) shares for the last five years, while they gained 671%. This just goes to show the value creation that some businesses can achieve. It’s down 2.9% in the last seven days.
It really delights us to see such great share price performance for investors.
Check out our latest analysis for Minda
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During five years of share price growth, Minda achieved compound earnings per share (EPS) growth of 44% per year. This EPS growth is reasonably close to the 50% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn’t morphed very much. In fact, the share price seems to largely reflect the EPS growth.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Minda has improved its bottom line lately, but is it going to grow revenue? If you’re interested, you could check this free report showing consensus revenue forecasts.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any 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. As it happens, Minda’s TSR for the last 5 years was 687%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
While the broader market lost about 0.1% in the twelve months, Minda shareholders did even worse, losing 17% (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. Longer term investors wouldn’t be so upset, since they would have made 51%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. If you would like to research Minda in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.