The worst outcome, after buying shares in a company (assuming no leverage), would be to lose all the money you invested. But on a lighter note, a good company can see its share price increase by more than 100%. A great example is torrent pharmaceuticals limited (NSE:TORNTPHARM), which saw its share price rise 174% in five years. He also pleased shareholders with a 23% gain in the last three months. But this move may well have been assisted by the reasonably buoyant market (up 13% in 90 days).
With that in mind, it's worth looking at whether the company's underlying fundamentals have been the driver of long-term performance, or if there are some discrepancies.
See our latest analysis of Torrent Pharmaceuticals
in his essay The Graham-and-Doddsville Superinvestors Warren Buffett described how stock prices don't always rationally reflect the value of a business. By comparing earnings per share (EPS) and stock price changes over time, we can get a sense of how investor attitudes toward a company have transformed over time.
During five years of stock price growth, Torrent Pharmaceuticals achieved compound earnings per share (EPS) growth of 13% per year. This EPS growth is less than the 22% average annual increase in share price. Therefore, it is fair to assume that the market has a better opinion of the business than it did five years ago. And that's not surprising given the track record of growth. This favorable sentiment is reflected in its (quite bullish) P/E ratio of 52.87.
You can see below how EPS has changed over time (find out the exact values โโby clicking on the image).
We know Torrent Pharmaceuticals has improved its bottom line of late, but is it going to increase revenue? Check if analysts think Torrent Pharmaceuticals will increase revenue in the future.
What about dividends?
In addition to measuring stock price performance, investors must also consider total shareholder return (TSR). While the stock 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 increase or spin-off. So for companies that pay generous dividends, the TSR is typically much higher than the stock price return. In the case of Torrent Pharmaceuticals, it has a TSR of 194% for the last 5 years. That beats the stock price performance we mentioned above. The dividends paid by the company have thus boosted the total shareholder return.
a different perspective
It's nice to see that Torrent Pharmaceuticals shareholders have received a 30% total shareholder return over the last year. And that includes the dividend. Given that the one-year TSR is better than the five-year TSR (the latter comes in at 24% per year), it appears that the stock's performance has improved of late. With stock price momentum still strong, it might be worth taking a closer look at stocks, lest you miss an opportunity. It is always interesting to track the performance of the stock price over the long term. But to better understand Torrent Pharmaceuticals, we must consider many other factors. Consider the risks, for example. All companies have them, and we have seen 2 Warning Signs for Torrent Pharmaceuticals you should know about
We will like Torrent Pharmaceuticals more if we see large internal purchases. While we wait, take a look at this free list of growing companies with significant and recent internal purchases.
Please note that the market returns quoted in this article reflect the market weighted average returns of shares currently listed on Indian stock exchanges.
Valuation is complex, but we are helping to simplify it.
Find out if pharmaceuticals torrent is potentially overvalued or undervalued by consulting our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, internal transactions and financial health.
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This Simply Wall St article is general in nature. We provide feedback based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell any stock, and it does not take into account your goals or financial situation. Our goal is to provide you with long-term focused analysis driven by fundamental data. Please note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative material. Simply Wall St does not have a position in any of the mentioned stocks.
