Is Indian Energy Exchange's (NSE:IEX) 159% Share Price Increase Well Justified?

Unfortunately, investing is risky - companies can and do go bankrupt. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! For example, the Indian Energy Exchange Limited (NSE:IEX) share price had more than doubled in just one year - up 159%. On top of that, the share price is up 58% in about a quarter. It is also impressive that the stock is up 112% over three years, adding to the sense that it is a real winner.

Check out our latest analysis for Indian Energy Exchange

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the last year Indian Energy Exchange grew its earnings per share (EPS) by 14%. This EPS growth is significantly lower than the 159% increase in the share price. This indicates that the market is now more optimistic about the stock. The fairly generous P/E ratio of 53.19 also points to this optimism.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It might be well worthwhile taking a look at our free report on Indian Energy Exchange's earnings, revenue and cash flow.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Indian Energy Exchange the TSR over the last year was 162%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Pleasingly, Indian Energy Exchange's total shareholder return last year was 162%. That's including the dividend. That gain actually surpasses the 30% TSR it generated (per year) over three years. Given the track record of solid returns over varying time frames, it might be worth putting Indian Energy Exchange on your watchlist. It's always interesting to track share price performance over the longer term. But to understand Indian Energy Exchange better, we need to consider many other factors. To that end, you should be aware of the 3 warning signs we've spotted with Indian Energy Exchange .

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.

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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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