Ingersoll-Rand (India)'s (NSE:INGERRAND) earnings growth rate lags the 39% CAGR delivered to shareholders

By
Simply Wall St
Published
May 14, 2022
NSEI:INGERRAND
Source: Shutterstock

Ingersoll-Rand (India) Limited (NSE:INGERRAND) shareholders have seen the share price descend 10% over the month. But that doesn't undermine the rather lovely longer-term return, if you measure over the last three years. In three years the stock price has launched 154% higher: a great result. After a run like that some may not be surprised to see prices moderate. If the business can perform well for years to come, then the recent drop could be an opportunity.

Although Ingersoll-Rand (India) 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.

Check out our latest analysis for Ingersoll-Rand (India)

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Ingersoll-Rand (India) was able to grow its EPS at 5.7% per year over three years, sending the share price higher. This EPS growth is lower than the 37% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did three years ago. That's not necessarily surprising considering the three-year track record of earnings growth.

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

earnings-per-share-growth
NSEI:INGERRAND Earnings Per Share Growth May 14th 2022

This free interactive report on Ingersoll-Rand (India)'s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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, Ingersoll-Rand (India)'s TSR for the last 3 years was 168%, 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 good to see that Ingersoll-Rand (India) has rewarded shareholders with a total shareholder return of 91% in the last twelve months. That's including the dividend. That gain is better than the annual TSR over five years, which is 19%. 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. Before forming an opinion on Ingersoll-Rand (India) you might want to consider these 3 valuation metrics.

Of course Ingersoll-Rand (India) may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.