The Ajanta Pharma (NSE:AJANTPHARM) Share Price Has Gained 55% And Shareholders Are Hoping For More

If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can significantly boost your returns by picking above-average stocks. For example, the Ajanta Pharma Limited (NSE:AJANTPHARM) share price is up 55% in the last year, clearly besting the market return of around 0.2% (not including dividends). So that should have shareholders smiling. And shareholders have also done well over the long term, with an increase of 32% in the last three years.

Check out our latest analysis for Ajanta Pharma

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Ajanta Pharma was able to grow EPS by 27% in the last twelve months. This EPS growth is significantly lower than the 55% increase in the share price. This indicates that the market is now more optimistic about the stock.

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

We know that Ajanta Pharma has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. As it happens, Ajanta Pharma's TSR for the last year was 57%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Ajanta Pharma has rewarded shareholders with a total shareholder return of 57% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 1.6% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 2 warning signs for Ajanta Pharma 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.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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