Dwarikesh Sugar Industries Limited (NSE:DWARKESH) shareholders might be concerned after seeing the share price drop 24% in the last month. But that doesn't displace its brilliant performance over three years. The longer term view reveals that the share price is up 309% in that period. Arguably, the recent fall is to be expected after such a strong rise. The share price action could signify that the business itself is dramatically improved, in that time.
Although Dwarikesh Sugar Industries has shed ₹2.4b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
Dwarikesh Sugar Industries was able to grow its EPS at 18% per year over three years, sending the share price higher. This EPS growth is lower than the 60% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did three years ago. That's not necessarily surprising considering the three-year track record of earnings growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It might be well worthwhile taking a look at our free report on Dwarikesh Sugar Industries' 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Dwarikesh Sugar Industries' TSR for the last 3 years was 352%, 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 Dwarikesh Sugar Industries shareholders have received a total shareholder return of 102% over the last year. Of course, that includes the dividend. That's better than the annualised return of 20% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Dwarikesh Sugar Industries has 4 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.
Of course Dwarikesh Sugar Industries may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IN exchanges.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.