Recent 13% pullback isn't enough to hurt long-term Gujarat Apollo Industries (NSE:GUJAPOLLO) shareholders, they're still up 111% over 3 years
Gujarat Apollo Industries Limited (NSE:GUJAPOLLO) shareholders might be concerned after seeing the share price drop 17% in the last quarter. But that doesn't undermine the rather lovely longer-term return, if you measure over the last three years. The share price marched upwards over that time, and is now 108% higher than it was. So the recent fall in the share price should be viewed in that context. Only time will tell if there is still too much optimism currently reflected in the share price.
Since the long term performance has been good but there's been a recent pullback of 13%, let's check if the fundamentals match the share price.
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 the three years of share price growth, Gujarat Apollo Industries actually saw its earnings per share (EPS) drop 49% per year.
This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
Languishing at just 0.5%, we doubt the dividend is doing much to prop up the share price. You can only imagine how long term shareholders feel about the declining revenue trend (slipping at 13% per year). The only thing that's clear is there is low correlation between Gujarat Apollo Industries' share price and its historic fundamental data. Further research may be required!
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Gujarat Apollo Industries' TSR for the last 3 years was 111%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It's nice to see that Gujarat Apollo Industries shareholders have received a total shareholder return of 15% over the last year. And that does include the dividend. However, the TSR over five years, coming in at 16% per year, is even more impressive. It's always interesting to track share price performance over the longer term. But to understand Gujarat Apollo Industries better, we need to consider many other factors. Even so, be aware that Gujarat Apollo Industries is showing 3 warning signs in our investment analysis , and 2 of those are a bit unpleasant...
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Indian exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.