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The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. 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 The Indian Hume Pipe Company Limited (NSE:INDIANHUME) share price has soared 192% in the last half decade. Most would be very happy with that.
View our latest analysis for Indian Hume Pipe
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...' 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.
Over half a decade, Indian Hume Pipe managed to grow its earnings per share at 29% a year. The EPS growth is more impressive than the yearly share price gain of 24% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Indian Hume Pipe has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Indian Hume Pipe's financial health with this free report on its balance sheet.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Indian Hume Pipe's TSR for the last 5 years was 207%, 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 Indian Hume Pipe has rewarded shareholders with a total shareholder return of 6.1% in the last twelve months. Of course, that includes the dividend. Having said that, the five-year TSR of 25% a year, is even better. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. Before forming an opinion on Indian Hume Pipe you might want to consider these 3 valuation metrics.