When you buy a stock there is always a possibility that it could drop 100%. But when you pick a company that is really flourishing, you can make more than 100%. One great example is 3M India Limited (NSE:3MINDIA) which saw its share price drive 236% higher over five years. In the last week the share price is up 1.5%.
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During five years of share price growth, 3M India achieved compound earnings per share (EPS) growth of 43% per year. This EPS growth is higher than the 27% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. Having said that, the market is still optimistic, given the P/E ratio of 68.13.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
This free interactive report on 3M India's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
While the broader market gained around 4.4% in the last year, 3M India shareholders lost 11%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 27% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Before deciding if you like the current share price, check how 3M India scores on these 3 valuation metrics.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IN exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.