PPAP Automotive (NSE:PPAP) Shareholders Have Enjoyed A 76% Share Price Gain

Stock pickers are generally looking for stocks that will outperform the broader market. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, long term PPAP Automotive Limited (NSE:PPAP) shareholders have enjoyed a 76% share price rise over the last half decade, well in excess of the market return of around 48% (not including dividends).

Check out our latest analysis for PPAP Automotive

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 five years of share price growth, PPAP Automotive actually saw its EPS drop 7.1% 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.

We doubt the modest 1.1% dividend yield is attracting many buyers to the stock. The revenue growth of 0.6% per year hardly seems impressive. So why is the share price up? It's not immediately obvious to us, but a closer look at the company's progress over time might yield answers.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

If you are thinking of buying or selling PPAP Automotive stock, you should check out this FREE detailed report on its balance sheet.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, PPAP Automotive's TSR for the last 5 years was 89%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that PPAP Automotive shareholders have received a total shareholder return of 66% over one year. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 14% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand PPAP Automotive better, we need to consider many other factors. For instance, we've identified 4 warning signs for PPAP Automotive (1 is significant) that you should be aware of.

But note: PPAP Automotive may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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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This article by Simply Wall St is general in nature. 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.
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