When we invest, we're generally looking for stocks that outperform the market average. And in our experience, buying the right stocks can give your wealth a significant boost. For example, long term Honda Siel Power Products Limited (NSE:HONDAPOWER) shareholders have enjoyed a 36% share price rise over the last half decade, well in excess of the market return of around 30% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 7.8% , including dividends .
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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, Honda Siel Power Products achieved compound earnings per share (EPS) growth of 20% per year. The EPS growth is more impressive than the yearly share price gain of 6.3% over the same period. So it seems the market isn't so enthusiastic about the stock these days.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It might be well worthwhile taking a look at our free report on Honda Siel Power Products's earnings, revenue and cash flow.
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 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Honda Siel Power Products the TSR over the last 5 years was 40%, 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
Honda Siel Power Products's TSR for the year was broadly in line with the market average, at 7.8%. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 7.0%. It is possible that management foresight will bring growth well into the future, even if the share price slows down. Is Honda Siel Power Products cheap compared to other companies? These 3 valuation measures might help you decide.
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 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.