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These days it’s easy to simply buy an index fund, and your returns should (roughly) match the market. But if you pick the right individual stocks, you could make more than that. To wit, the L&T Technology Services Limited (NSE:LTTS) share price is 27% higher than it was a year ago, much better than the market return of around -2.1% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! L&T Technology Services hasn’t been listed for long, so it’s still not clear if it is a long term winner.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
L&T Technology Services was able to grow EPS by 49% in the last twelve months. It’s fair to say that the share price gain of 27% did not keep pace with the EPS growth. Therefore, it seems the market isn’t as excited about L&T Technology Services as it was before. This could be an opportunity.
We know that L&T Technology Services has improved its bottom line lately, but is it going to grow revenue? If you’re interested, you could check this free report showing consensus revenue forecasts.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for L&T Technology Services the TSR over the last year was 30%, which is better than the share price return mentioned above. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It’s nice to see that L&T Technology Services shareholders have gained 30% over the last year, including dividends. Unfortunately the share price is down 0.5% over the last quarter. Shorter term share price moves often don’t signify much about the business itself. Before spending more time on L&T Technology Services it might be wise to click here to see if insiders have been buying or selling shares.
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.