Bhansali Engineering Polymers' (NSE:BEPL) five-year total shareholder returns outpace the underlying earnings growth

By
Simply Wall St
Published
January 19, 2022
NSEI:BEPL
Source: Shutterstock

Bhansali Engineering Polymers Limited (NSE:BEPL) shareholders might be concerned after seeing the share price drop 18% in the last quarter. But that doesn't undermine the fantastic longer term performance (measured over five years). To be precise, the stock price is 551% higher than it was five years ago, a wonderful performance by any measure. So it might be that some shareholders are taking profits after good performance. The most important thing for savvy investors to consider is whether the underlying business can justify the share price gain. It really delights us to see such great share price performance for investors.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

View our latest analysis for Bhansali Engineering Polymers

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

Over half a decade, Bhansali Engineering Polymers managed to grow its earnings per share at 66% a year. This EPS growth is higher than the 45% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. This cautious sentiment is reflected in its (fairly low) P/E ratio of 5.80.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

earnings-per-share-growth
NSEI:BEPL Earnings Per Share Growth January 19th 2022

This free interactive report on Bhansali Engineering Polymers' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Bhansali Engineering Polymers' TSR for the last 5 years was 572%, 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

Bhansali Engineering Polymers shareholders gained a total return of 0.5% during the year. But that was short of the market average. If we look back over five years, the returns are even better, coming in at 46% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 1 warning sign for Bhansali Engineering Polymers you should be aware of.

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.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.