In This Article:
When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. One great example is Sundram Fasteners Limited (NSE:SUNDRMFAST) which saw its share price drive 211% higher over five years. Better yet, the share price has risen 13% in the last week. But this might be partly because the broader market had a good week last week, gaining 7.1%.
Check out our latest analysis for Sundram Fasteners
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...' 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 five years of share price growth, Sundram Fasteners achieved compound earnings per share (EPS) growth of 30% per year. This EPS growth is reasonably close to the 26% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. In fact, the share price seems to largely reflect the EPS growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Sundram Fasteners has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
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 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Sundram Fasteners the TSR over the last 5 years was 229%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Sundram Fasteners shareholders are down 18% for the year (even including dividends) , but the market itself is up 0.3%. 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 27%, 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. Is Sundram Fasteners cheap compared to other companies? These 3 valuation measures might help you decide.