The total return for Titan (NSE:TITAN) investors has risen faster than earnings growth over the last five years

By
Simply Wall St
Published
November 23, 2021
NSEI:TITAN
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Long term investing can be life changing when you buy and hold the truly great businesses. And we've seen some truly amazing gains over the years. For example, the Titan Company Limited (NSE:TITAN) share price is up a whopping 661% in the last half decade, a handsome return for long term holders. And this is just one example of the epic gains achieved by some long term investors. It's also good to see the share price up 31% over the last quarter. We love happy stories like this one. The company should be really proud of that performance!

While the stock has fallen 5.7% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

See our latest analysis for Titan

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).

During five years of share price growth, Titan achieved compound earnings per share (EPS) growth of 20% per year. This EPS growth is slower than the share price growth of 50% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth. This optimism is visible in its fairly high P/E ratio of 121.34.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

earnings-per-share-growth
NSEI:TITAN Earnings Per Share Growth November 24th 2021

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. 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). 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, Titan's TSR for the last 5 years was 676%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Titan has rewarded shareholders with a total shareholder return of 80% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 51%. 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. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.

There are plenty of other companies that have insiders buying up shares. You probably do 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.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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Simply Wall St

Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.