Stock Analysis

Nizhnekamskneftekhim (MCX:NKNC) Has Gifted Shareholders With A Fantastic 235% Total Return On Their Investment

MISX:NKNC
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The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, you can make far more than 100% on a really good stock. For example, the Public Joint Stock Company Nizhnekamskneftekhim (MCX:NKNC) share price has soared 118% in the last half decade. Most would be very happy with that.

See our latest analysis for Nizhnekamskneftekhim

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, Nizhnekamskneftekhim actually saw its EPS drop 5.9% per year.

Essentially, it doesn't seem likely that investors are focused on EPS. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.

We note that the dividend is higher than it was previously - always nice to see. Maybe dividend investors have helped support the share price. The revenue growth of about 4.0% per year might also encourage buyers.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
MISX:NKNC Earnings and Revenue Growth January 14th 2021

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Nizhnekamskneftekhim the TSR over the last 5 years was 235%, 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

Nizhnekamskneftekhim shareholders are down 13% for the year (even including dividends), but the market itself is up 5.4%. 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. Longer term investors wouldn't be so upset, since they would have made 27%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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 for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Nizhnekamskneftekhim (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on RU exchanges.

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Valuation is complex, but we're helping make it simple.

Find out whether Nizhnekamskneftekhim is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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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About MISX:NKNC

Nizhnekamskneftekhim

Public Joint Stock Company Nizhnekamskneftekhim produces and sells petrochemicals in Russia.

Good value with mediocre balance sheet.

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