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Precision Wires India Ltd. (NSE:PRECWIRE) shareholders might be concerned after seeing the share price drop 14% in the last quarter. But that does not change the realty that the stock's performance has been terrific, over five years. In that time, the share price has soared some 365% higher! Arguably, the recent fall is to be expected after such a strong rise. But the real question is whether the business fundamentals can improve over the long term.
View our latest analysis for Precision Wires India
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
During five years of share price growth, Precision Wires India achieved compound earnings per share (EPS) growth of 20% per year. This EPS growth is slower than the share price growth of 36% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on Precision Wires India's earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Precision Wires India, it has a TSR of 440% for the last 5 years. 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
Investors in Precision Wires India had a tough year, with a total loss of 31% (including dividends), against a market gain of about 1.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 40% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Is Precision Wires India cheap compared to other companies? These 3 valuation measures might help you decide.