Seshasayee Paper and Boards' (NSE:SESHAPAPER) earnings growth rate lags the 15% CAGR delivered to shareholders

By
Simply Wall St
Published
August 23, 2021
NSEI:SESHAPAPER
Source: Shutterstock

It might be of some concern to shareholders to see the Seshasayee Paper and Boards Limited (NSE:SESHAPAPER) share price down 22% in the last month. While that's not great, the returns over five years have been decent. It's good to see the share price is up 87% in that time, better than its market return of 86%.

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 Seshasayee Paper and Boards

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, Seshasayee Paper and Boards achieved compound earnings per share (EPS) growth of 25% per year. The EPS growth is more impressive than the yearly share price gain of 13% over the same period. So it seems the market isn't so enthusiastic about the stock these days. The reasonably low P/E ratio of 9.49 also suggests market apprehension.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
NSEI:SESHAPAPER Earnings Per Share Growth August 24th 2021

Dive deeper into Seshasayee Paper and Boards' key metrics by checking this interactive graph of Seshasayee Paper and Boards's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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 Seshasayee Paper and Boards the TSR over the last 5 years was 105%, 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

Seshasayee Paper and Boards shareholders are up 9.7% for the year (even including dividends). But that return falls short of the market. On the bright side, the longer term returns (running at about 15% a year, over half a decade) look better. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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. Case in point: We've spotted 3 warning signs for Seshasayee Paper and Boards you should be aware of, and 1 of them doesn't sit too well with us.

We will like Seshasayee Paper and Boards better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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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