Stock Analysis

Minda's (NSE:MINDACORP) earnings growth rate lags the 31% CAGR delivered to shareholders

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NSEI:MINDACORP
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The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Minda Corporation Limited (NSE:MINDACORP) share price has soared 124% in the last three years. How nice for those who held the stock! But it's down 8.0% in the last week. However, this might be related to the overall market decline of 3.7% in a week.

Although Minda has shed ₹4.3b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

However if you'd rather see where the opportunities and risks are within MINDACORP's industry, you can check out our analysis on the IN Auto Components industry.

There is no denying that markets are sometimes efficient, but prices do not always reflect 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 three years of share price growth, Minda achieved compound earnings per share growth of 13% per year. In comparison, the 31% per year gain in the share price outpaces the EPS growth. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It's not unusual to see the market 're-rate' a stock, after a few years of growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
NSEI:MINDACORP Earnings Per Share Growth September 28th 2022

We know that Minda has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Minda, it has a TSR of 127% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Minda has rewarded shareholders with a total shareholder return of 71% in the last twelve months. Of course, that includes 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 1 warning sign for Minda that you should be aware of before investing here.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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

Valuation is complex, but we're helping make it simple.

Find out whether Minda is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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About NSEI:MINDACORP

Minda

Minda Corporation Limited manufactures and sells automobile components and parts.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation6
Future Growth2
Past Performance5
Financial Health6
Dividends3

Read more about these checks in the individual report sections or in our analysis model.

Very undervalued with flawless balance sheet.