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Buying shares in the best businesses can build meaningful wealth for you and your family. While the best companies are hard to find, but they can generate massive returns over long periods. To wit, the K.P.R. Mill Limited (NSE:KPRMILL) share price has soared 304% over five years. This just goes to show the value creation that some businesses can achieve. Better yet, the share price has risen 11% in the last week.
See our latest analysis for K.P.R. Mill
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During five years of share price growth, K.P.R. Mill achieved compound earnings per share (EPS) growth of 19% per year. This EPS growth is lower than the 32% average annual increase in the share price. 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.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that K.P.R. Mill has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
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. We note that for K.P.R. Mill the TSR over the last 5 years was 318%, 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
K.P.R. Mill shareholders are up 6.4% for the year (even including dividends) . Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 33% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. Before forming an opinion on K.P.R. Mill you might want to consider these 3 valuation metrics.