Dr. Lal PathLabs (NSE:LALPATHLAB) shareholders have earned a 26% CAGR over the last five years

Published
August 17, 2022
NSEI:LALPATHLAB
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When you buy a stock there is always a possibility that it could drop 100%. But when you pick a company that is really flourishing, you can make more than 100%. One great example is Dr. Lal PathLabs Limited (NSE:LALPATHLAB) which saw its share price drive 207% higher over five years. And in the last month, the share price has gained 26%. This could be related to the recent financial results that were recently released - you could check the most recent data by reading our company report.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

Check out our latest analysis for Dr. Lal PathLabs

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Over half a decade, Dr. Lal PathLabs managed to grow its earnings per share at 11% a year. This EPS growth is slower than the share price growth of 25% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 75.72.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

earnings-per-share-growth
NSEI:LALPATHLAB Earnings Per Share Growth August 17th 2022

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of Dr. Lal PathLabs' 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. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Dr. Lal PathLabs the TSR over the last 5 years was 217%, 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

Dr. Lal PathLabs shareholders are down 35% for the year (even including dividends), but the market itself is up 10%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 26% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Even so, be aware that Dr. Lal PathLabs is showing 3 warning signs in our investment analysis , you should know about...

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.

Valuation is complex, but we're helping make it simple.

Find out whether Dr. Lal PathLabs is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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