Nilkamal’s (NSE:NILKAMAL) Three-Year Total Shareholder Returns Exceed Underlying Earnings Growth
It’s been a sweet week for Nilkamal Limited (NSE: NILKAMAL), which are down 11%. On the other hand, the stock has performed reasonably well over three years. In fact, the stock is up 86%, which is better than the market return of 74%.
In light of the stock’s 11% drop over the past week, we want to look at the longer-term story and see if fundamentals have been driving the company’s positive three-year performance.
See our latest analysis for Nilkamal
In his test The Graham-and-Doddsville super-investors Warren Buffett has described how stock prices don’t always rationally reflect a company’s value. An imperfect but simple way to examine how a company’s market perception has changed is to compare the evolution of earnings per share (EPS) with the movement of the share price.
Nilkamal was able to increase its EPS by 1.4% per year over three years, driving up the share price. By comparison, the 23% a year gain in share price outpaces EPS growth. This suggests that as the company has progressed over the past few years, it has earned the trust of market players. It’s quite common to see investors fall in love with a company after a few years of solid progress.
The image below shows how EPS has tracked over time (if you click on the image you can see more details).
We appreciate the fact that insiders have been buying stocks over the past twelve months. Even so, future earnings will be far more important to whether current shareholders are making money. It might be interesting to take a look at our free Nilkamal earnings, revenue and cash flow report.
What about dividends?
In addition to measuring share price performance, investors should also consider total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital increases, as well as any dividends, on the basis of the assumption that dividends are reinvested. So for companies that pay a generous dividend, the TSR is often much higher than the stock price return. It turns out that Nilkamal’s TSR for the last 3 years was 91%, which exceeds the share price return mentioned earlier. This is largely the result of its dividend payments!
A different perspective
It’s nice to see that Nilkamal shareholders have received a total shareholder return of 62% over the past year. This includes the dividend. That’s better than the 9% annualized return over half a decade, which implies the company has been doing better recently. At best, this may hint at genuine trading momentum, implying that now could be a great time to dig deeper. While it’s worth considering the various impacts that market conditions can have on the stock price, there are other, even more important factors. For example, we have identified 2 warning signs for Nilkamal (1 is a little unpleasant) which you should be aware of.
There are many other companies whose insiders buy shares. You probably do not want to miss this free list of growing companies insiders are buying.
Please note that the market returns quoted in this article reflect the average market-weighted returns of the stocks currently trading on the IN exchanges.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.