Introducing JK Tyre & Industries (NSE:JKTYRE), The Stock That Zoomed 153% In The Last Year

By
Simply Wall St
Published
May 19, 2021
NSEI:JKTYRE
Source: Shutterstock

Unless you borrow money to invest, the potential losses are limited. But if you pick the right business to buy shares in, you can make more than you can lose. Take, for example JK Tyre & Industries Limited (NSE:JKTYRE). Its share price is already up an impressive 153% in the last twelve months. In more good news, the share price has risen 6.1% in thirty days. Zooming out, the stock is actually down 8.5% in the last three years.

View our latest analysis for JK Tyre & Industries

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 the last year JK Tyre & Industries grew its earnings per share, moving from a loss to a profit.

When a company is just on the edge of profitability it can be well worth considering other metrics in order to more precisely gauge growth (and therefore understand share price movements).

We doubt the modest 0.6% dividend yield is doing much to support the share price. Unfortunately JK Tyre & Industries' fell 17% over twelve months. So using a snapshot of key business metrics doesn't give us a good picture of why the market is bidding up the stock.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
NSEI:JKTYRE Earnings and Revenue Growth May 20th 2021

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free report showing analyst forecasts should help you form a view on JK Tyre & Industries

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, JK Tyre & Industries' TSR for the last year was 156%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that JK Tyre & Industries shareholders have received a total shareholder return of 156% over one year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 11%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand JK Tyre & Industries better, we need to consider many other factors. For example, we've discovered 3 warning signs for JK Tyre & Industries (1 is significant!) that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IN exchanges.

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