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Himadri Speciality Chemical Limited (NSE:HSCL) shareholders might be concerned after seeing the share price drop 12% in the last quarter. But over the last three years the stock has shone bright like a diamond. Over that time, we’ve been excited to watch the share price climb an impressive 672%. So the recent fall doesn’t do much to dampen our respect for the business. The thing to consider is whether there is still too much elation around the company’s prospects.
Anyone who held for that rewarding ride would probably be keen to talk about it.
Check out our latest analysis for Himadri Speciality Chemical
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Himadri Speciality Chemical became profitable within the last three years. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It is of course excellent to see how Himadri Speciality Chemical has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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, Himadri Speciality Chemical’s TSR for the last 3 years was 674%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Himadri Speciality Chemical shareholders are down 25% for the year (even including dividends), but the market itself is up 2.2%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn’t be so upset, since they would have made 46%, each year, over five years. 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. Before deciding if you like the current share price, check how Himadri Speciality Chemical scores on these 3 valuation metrics.