Hindustan Petroleum's (NSE:HINDPETRO) underlying earnings growth outpaced the favorable return generated for shareholders over the past year

By
Simply Wall St
Published
November 30, 2021
NSEI:HINDPETRO
Source: Shutterstock

There's no doubt that investing in the stock market is a truly brilliant way to build wealth. But if when you choose to buy stocks, some of them will be below average performers. Over the last year the Hindustan Petroleum Corporation Limited (NSE:HINDPETRO) share price is up 39%, but that's less than the broader market return. The longer term returns have not been as good, with the stock price only 29% higher than it was three years ago.

In light of the stock dropping 7.4% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive one-year return.

View our latest analysis for Hindustan Petroleum

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Hindustan Petroleum was able to grow EPS by 57% in the last twelve months. It's fair to say that the share price gain of 39% did not keep pace with the EPS growth. So it seems like the market has cooled on Hindustan Petroleum, despite the growth. Interesting. The caution is also evident in the lowish P/E ratio of 4.40.

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

earnings-per-share-growth
NSEI:HINDPETRO Earnings Per Share Growth December 1st 2021

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

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 Hindustan Petroleum the TSR over the last 1 year was 51%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Hindustan Petroleum has rewarded shareholders with a total shareholder return of 51% in the last twelve months. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 6% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Hindustan Petroleum better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with Hindustan Petroleum .

We will like Hindustan Petroleum better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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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