Long term investing can be life changing when you buy and hold the truly great businesses. And highest quality companies can see their share prices grow by huge amounts. Just think about the savvy investors who held Whirlpool of India Limited (NSE:WHIRLPOOL) shares for the last five years, while they gained 660%. If that doesn’t get you thinking about long term investing, we don’t know what will. And in the last week the share price has popped 16%.
Anyone who held for that rewarding ride would probably be keen to talk about it.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During five years of share price growth, Whirlpool of India achieved compound earnings per share (EPS) growth of 29% 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 favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 50.08.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Whirlpool of India 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?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Whirlpool of India’s TSR for the last 5 years was 664%, 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 Whirlpool of India shareholders have received a total shareholder return of 3.4% over the last year. And that does include the dividend. However, the TSR over five years, coming in at 50% per year, is even more impressive. Potential buyers might understandably feel they’ve missed the opportunity, but it’s always possible business is still firing on all cylinders. Is Whirlpool of India cheap compared to other companies? These 3 valuation measures might help you decide.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.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 email@example.com. 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.