If You Had Bought Johnson Controls-Hitachi Air Conditioning India (NSE:JCHAC) Shares Five Years Ago You'd Have Earned 138% Returns

By
Simply Wall St
Published
February 09, 2021
NSEI:JCHAC

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. 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 Johnson Controls-Hitachi Air Conditioning India Limited (NSE:JCHAC) which saw its share price drive 138% higher over five years. It's also good to see the share price up 14% over the last quarter. But this could be related to the strong market, which is up 21% in the last three months.

See our latest analysis for Johnson Controls-Hitachi Air Conditioning India

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.

Johnson Controls-Hitachi Air Conditioning India's earnings per share are down 3.3% per year, despite strong share price performance over five years.

So it's hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. Therefore, it's worth taking a look at other metrics to try to understand the share price movements.

We doubt the modest 0.06% dividend yield is attracting many buyers to the stock. In contrast revenue growth of 3.3% per year is probably viewed as evidence that Johnson Controls-Hitachi Air Conditioning India is growing, a real positive. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
NSEI:JCHAC Earnings and Revenue Growth February 10th 2021

Take a more thorough look at Johnson Controls-Hitachi Air Conditioning India's financial health with this free report on its balance sheet.

A Different Perspective

Investors in Johnson Controls-Hitachi Air Conditioning India had a tough year, with a total loss of 5.6% (including dividends), against a market gain of about 25%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 19%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Even so, be aware that Johnson Controls-Hitachi Air Conditioning India is showing 1 warning sign in our investment analysis , you should know about...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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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