If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can significantly boost your returns by picking above-average stocks. For example, the Dr. Lal PathLabs Limited (NSE:LALPATHLAB) share price is up 92% in the last year, clearly besting the market return of around 3.8% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! It is also impressive that the stock is up 35% over three years, adding to the sense that it is a real winner.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 the last year Dr. Lal PathLabs grew its earnings per share (EPS) by 27%. The share price gain of 92% certainly outpaced the EPS growth. This indicates that the market is now more optimistic about the stock. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 56.47.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Dr. Lal PathLabs has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
A Different Perspective
We're pleased to report that Dr. Lal PathLabs rewarded shareholders with a total shareholder return of 94% over the last year. And yes, that does include the dividend. That's better than the annualized TSR of 11% over the last three years. The improving returns to shareholders suggests the stock is becoming more popular with time. If you would like to research Dr. Lal PathLabs in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.