Reflecting on Sutlej Textiles and Industries' (NSE:SUTLEJTEX) Share Price Returns Over The Last Three Years

It is doubtless a positive to see that the Sutlej Textiles and Industries Limited (NSE:SUTLEJTEX) share price has gained some 67% in the last three months. But that doesn't change the fact that the returns over the last three years have been disappointing. In that time, the share price dropped 56%. Some might say the recent bounce is to be expected after such a bad drop. Perhaps the company has turned over a new leaf.

See our latest analysis for Sutlej Textiles and Industries

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.

Sutlej Textiles and Industries saw its share price decline over the three years in which its EPS also dropped, falling to a loss. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. However, we can say we'd expect to see a falling share price in this scenario.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

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). 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 Sutlej Textiles and Industries the TSR over the last 3 years was -53%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Sutlej Textiles and Industries has rewarded shareholders with a total shareholder return of 45% in the last twelve months. And that does include the dividend. That certainly beats the loss of about 1.5% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand Sutlej Textiles and Industries better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Sutlej Textiles and Industries (of which 1 makes us a bit uncomfortable!) you should know about.

Of course Sutlej Textiles and Industries 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.

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