Unfortunately, investing is risky - companies can and do go bankrupt. But if you pick the right stock, you can make a lot more than 100%. For example, the BEML Limited (NSE:BEML) share price has soared 184% return in just a single year. Also pleasing for shareholders was the 46% gain in the last three months. Having said that, the longer term returns aren't so impressive, with stock gaining just 28% in three years.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
BEML was able to grow EPS by 128% in the last twelve months. This EPS growth is significantly lower than the 184% increase in the share price. This indicates that the market is now more optimistic about the stock. The fairly generous P/E ratio of 58.32 also points to this optimism.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, BEML's TSR for the last year was 187%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that BEML has rewarded shareholders with a total shareholder return of 187% in the last twelve months. And that does include the dividend. That's better than the annualised return of 5% over half a decade, implying that the company is doing better recently. 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. Take risks, for example - BEML has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about.
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.
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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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