The maximum you can lose on any stock (assuming you are not using leverage) is 100% of your money. But if you buy shares of a very large company, you can After than double your money. Namely, the TVS Motor Company Limited (NSE: TVSMOTOR) the stock price has climbed 136% over the past three years. How good for those who held the stock! It’s also good to see the stock price up 36% in the last quarter.
So let’s examine and see if the long-term performance of the business has been consistent with the progress of the underlying business.
See our latest analysis for TVS Motor
It is undeniable that markets are sometimes efficient, but prices do not always reflect the underlying performance of companies. 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.
TVS Motor was able to increase its EPS by 2.4% a year over three years, driving the stock price higher. By comparison, the 33% yearly 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 is not uncommon to see the market “revalue” a stock after a few years of growth. This optimism is also reflected in the fairly generous P/E ratio of 55.58.
The graph below illustrates the evolution of EPS over time (reveal the exact values by clicking on the image).
We know that TVS Motor recently improved its results, but will it increase its revenue? You could check this free report showing analyst revenue forecast.
What about dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price performance. TSR is a calculation of return that takes into account the value of cash dividends (assuming any dividends received have been reinvested) and the calculated value of all discounted capital raisings and spinoffs. Arguably, TSR gives a more complete picture of the return generated by a stock. In the case of TVS Motor, it has a TSR of 140% over the last 3 years. This exceeds the performance of its share price that we mentioned earlier. The dividends paid by the company thus inflated the total return to shareholders.
A different perspective
It is good to see that TVS Motor has rewarded its shareholders with a total shareholder return of 53% over the past twelve months. This includes the dividend. As the one-year TSR is better than the five-year TSR (the latter standing at 9% per year), it seems that the stock’s performance has improved lately. Someone with an optimistic outlook might see the recent improvement in TSR as indicating that the company itself is improving over time. I find it very interesting to look at stock price over the long term as a proxy for company performance. But to really get insight, we also need to consider other information. Take risks, for example – TVS Motor has 2 warning signs (and 1 that can’t be ignored) that we think you should know about.
If you’re like me, then you 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 stocks currently trading on 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.