The Somany Ceramics (NSE:SOMANYCERA) Share Price Is Up 108% And Shareholders Are Boasting About It

When you buy shares in a company, there is always a risk that the price drops to zero. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! Take, for example Somany Ceramics Limited (NSE:SOMANYCERA). Its share price is already up an impressive 108% in the last twelve months. Also pleasing for shareholders was the 61% gain in the last three months. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report. Unfortunately the longer term returns are not so good, with the stock falling 37% in the last three years.

Check out our latest analysis for Somany Ceramics

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 the last year Somany Ceramics grew its earnings per share, moving from a loss to a profit.

When a company has just transitioned to profitability, earnings per share growth is not always the best way to look at the share price action.

We are skeptical of the suggestion that the 0.5% dividend yield would entice buyers to the stock. Somany Ceramics' revenue actually dropped 19% over last year. So using a snapshot of key business metrics doesn't give us a good picture of why the market is bidding up the stock.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. You can see what analysts are predicting for Somany Ceramics in this interactive graph of future profit estimates.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Somany Ceramics' TSR for the last year was 111%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Somany Ceramics shareholders have received a total shareholder return of 111% over the last year. That's including the dividend. That gain is better than the annual TSR over five years, which is 6%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Somany Ceramics better, we need to consider many other factors. Take risks, for example - Somany Ceramics has 4 warning signs (and 1 which is a bit unpleasant) we think you should know about.

Somany Ceramics is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider 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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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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