Supreme Petrochem (NSE:SUPPETRO) jumps 12% this week, though earnings growth is still tracking behind five-year shareholder returns

By
Simply Wall St
Published
September 13, 2021
NSEI:SUPPETRO
Source: Shutterstock

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, you can make far more than 100% on a really good stock. One great example is Supreme Petrochem Limited (NSE:SUPPETRO) which saw its share price drive 228% higher over five years. Better yet, the share price has risen 12% in the last week.

Since it's been a strong week for Supreme Petrochem shareholders, let's have a look at trend of the longer term fundamentals.

View our latest analysis for Supreme Petrochem

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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, Supreme Petrochem achieved compound earnings per share (EPS) growth of 54% per year. This EPS growth is higher than the 27% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. The reasonably low P/E ratio of 9.21 also suggests market apprehension.

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:SUPPETRO Earnings Per Share Growth September 14th 2021

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

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Supreme Petrochem the TSR over the last 5 years was 262%, 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

It's nice to see that Supreme Petrochem shareholders have received a total shareholder return of 235% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 29% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Supreme Petrochem you should know about.

We will like Supreme Petrochem 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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