Generally speaking, investors are inspired to be stock pickers by the potential to find the big winners. But when you hold the right stock for the right time period, the rewards can be truly huge. Take, for example, the Muthoot Capital Services Limited (NSE:MUTHTFN) share price, which skyrocketed 549% over three years.
It really delights us to see such great share price performance for investors.
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 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 three years of share price growth, Muthoot Capital Services achieved compound earnings per share growth of 48% per year. In comparison, the 86% per year gain in the share price outpaces the EPS growth. So it’s fair to assume the market has a higher opinion of the business than it did three years ago. It is quite common to see investors become enamoured with a business, after a few years of solid progress.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Muthoot Capital Services has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Muthoot Capital Services’s financial health with this free report on its balance sheet.
A Different Perspective
The last twelve months weren’t great for Muthoot Capital Services shares, which cost holders 2.0%, while the market was up about 0.8%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Investors are up over three years, booking 86% per year, much better than the more recent returns. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. If you would like to research Muthoot Capital Services in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
But note: Muthoot Capital Services may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).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 firstname.lastname@example.org. 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.