Does Agro Tech Foods' (NSE:ATFL) Share Price Gain of 70% Match Its Business Performance?

If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can do a lot better than that by buying good quality businesses for attractive prices. For example, the Agro Tech Foods Limited (NSE:ATFL) share price is up 70% in the last five years, slightly above the market return. Also positive is the 16% share price rise over the last year.

View our latest analysis for Agro Tech Foods

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Over half a decade, Agro Tech Foods managed to grow its earnings per share at 7.8% a year. This EPS growth is lower than the 11% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth. This optimism is visible in its fairly high P/E ratio of 59.14.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. As it happens, Agro Tech Foods' TSR for the last 5 years was 74%, 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

Agro Tech Foods provided a TSR of 16% over the last twelve months. But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 12% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. Is Agro Tech Foods cheap compared to other companies? These 3 valuation measures might help you decide.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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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