Stock Analysis

ESAB India (NSE:ESABINDIA) stock performs better than its underlying earnings growth over last five years

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NSEI:ESABINDIA
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When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. One great example is ESAB India Limited (NSE:ESABINDIA) which saw its share price drive 286% higher over five years. It's even up 13% in the last week.

The past week has proven to be lucrative for ESAB India investors, so let's see if fundamentals drove the company's five-year performance.

Though if you're not interested in researching what drove ESABINDIA's performance, we have a free list of interesting investing ideas to potentially inspire your next investment!

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 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.

Over half a decade, ESAB India managed to grow its earnings per share at 28% a year. This EPS growth is reasonably close to the 31% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. Rather, the share price has approximately tracked EPS growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
NSEI:ESABINDIA Earnings Per Share Growth October 1st 2022

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

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, ESAB India's TSR for the last 5 years was 363%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that ESAB India shareholders have received a total shareholder return of 71% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 36%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 1 warning sign for ESAB India that you should be aware of before investing here.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.

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About NSEI:ESABINDIA

ESAB India

ESAB India Limited manufactures and sells welding and cutting equipment in India.

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)
Valuation0
Future Growth0
Past Performance5
Financial Health6
Dividends3

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

Flawless balance sheet with solid track record.