Advanced Enzyme Technologies' (NSE:ADVENZYMES) earnings growth rate lags the 23% CAGR delivered to shareholders

By
Simply Wall St
Published
February 23, 2022
NSEI:ADVENZYMES
Source: Shutterstock

It hasn't been the best quarter for Advanced Enzyme Technologies Limited (NSE:ADVENZYMES) shareholders, since the share price has fallen 17% in that time. But over three years, the returns would have left most investors smiling In the last three years the share price is up, 86%: better than the market.

Since the long term performance has been good but there's been a recent pullback of 10%, let's check if the fundamentals match the share price.

See our latest analysis for Advanced Enzyme Technologies

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

During three years of share price growth, Advanced Enzyme Technologies achieved compound earnings per share growth of 6.1% per year. In comparison, the 23% per year gain in the share price outpaces the EPS growth. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. It's not unusual to see the market 're-rate' a stock, after a few years of growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

earnings-per-share-growth
NSEI:ADVENZYMES Earnings Per Share Growth February 23rd 2022

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

A Different Perspective

Advanced Enzyme Technologies shareholders are down 25% for the year (even including dividends), but the market itself is up 22%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Advanced Enzyme Technologies better, we need to consider many other factors. Even so, be aware that Advanced Enzyme Technologies is showing 1 warning sign in our investment analysis , you should know about...

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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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