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Titan Company Limited (NSE:TITAN) shareholders might be concerned after seeing the share price drop 28% in the last quarter. But in stark contrast, the returns over the last half decade have impressed. We think most investors would be happy with the 277% return, over that period. We think it’s more important to dwell on the long term returns than the short term returns. The more important question is whether the stock is too cheap or too expensive today.
In light of the stock dropping 9.6% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company’s positive five-year return.
See our latest analysis for Titan
To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ 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, Titan achieved compound earnings per share (EPS) growth of 25% per year. So the EPS growth rate is rather close to the annualized share price gain of 30% per year. That suggests that the market sentiment around the company hasn’t changed much over that time. Indeed, it would appear the share price is reacting to the EPS.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that Titan 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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Titan’s TSR for the last 5 years was 285%, 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 nice to see that Titan shareholders have received a total shareholder return of 13% over the last year. That’s including the dividend. Having said that, the five-year TSR of 31% a year, is even better. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. 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. For instance, we’ve identified 3 warning signs for Titan (2 are concerning) that you should be aware of.
Of course Titan may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IN exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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