In This Article:
By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Gulf Oil Lubricants India Limited (NSE:GULFOILLUB) share price is up 68% in the last three years, clearly besting than the market return of around 41% (not including dividends).
View our latest analysis for Gulf Oil Lubricants India
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During three years of share price growth, Gulf Oil Lubricants India achieved compound earnings per share growth of 23% per year. This EPS growth is higher than the 19% average annual increase in the share price. So it seems investors have become more cautious about the company, over time.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Gulf Oil Lubricants India 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. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Gulf Oil Lubricants India the TSR over the last 3 years was 74%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Gulf Oil Lubricants India shareholders are down 1.2% for the year (even including dividends), but the broader market is up 0.8%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Fortunately the longer term story is brighter, with total returns averaging about 20% per year over three years. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. If you would like to research Gulf Oil Lubricants India in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.