Should Bharat Bijlee (NSE:BBL) Be Disappointed With Their 24% Profit?

While Bharat Bijlee Limited (NSE:BBL) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 14% in the last quarter. But the silver lining is the stock is up over five years. However we are not very impressed because the share price is only up 24%, less than the market return of 53%.

View our latest analysis for Bharat Bijlee

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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the last half decade, Bharat Bijlee became profitable. That would generally be considered a positive, so we'd expect the share price to be up. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the Bharat Bijlee share price is down 24% in the last three years. During the same period, EPS grew by 13% each year. It would appear there's a real mismatch between the increasing EPS and the share price, which has declined -9% a year for three years.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Dive deeper into Bharat Bijlee's key metrics by checking this interactive graph of Bharat Bijlee's earnings, revenue and cash flow.

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 Bharat Bijlee, it has a TSR of 28% for the last 5 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

Investors in Bharat Bijlee had a tough year, with a total loss of 11% (including dividends), against a market gain of about 7.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 5% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Case in point: We've spotted 2 warning signs for Bharat Bijlee you should be aware of.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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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