Not the best quarter since SJVN Limited (NSE:SJVN) shareholders, as the share price fell 19% during this period. In contrast, the stock has been on the rise over the past three years. Over this period, it has increased by 53%, which is not bad, but not surprising either.
Last week proved to be lucrative for SJVN investors, so let’s see if fundamentals drove the company’s three-year performance.
See our latest analysis for SJVN
In his test The Graham-and-Doddsville super-investors Warren Buffett has described how stock prices don’t always rationally reflect a company’s value. An imperfect but reasonable way to gauge changing sentiment around a company is to compare earnings per share (EPS) with the stock price.
Over the past three years, SJVN has failed to increase earnings per share, which have fallen 12% (annualized).
This means that the market is unlikely to judge the company based on earnings growth. Given this situation, it makes sense to look at other measures as well.
We doubt that dividend payouts explain the rise in the share price, as we see no improvement in this regard. The 0.9% drop in revenues would do little to encourage buyers. Ultimately, we can’t really explain why the stock price is up, but the answer may lie in a closer look at the data.
You can see how earnings and income have changed over time below (find out the exact values by clicking on the image).
We are pleased to report that the CEO is compensated more modestly than most CEOs of similarly capitalized companies. It’s always worth keeping an eye on CEO compensation, but a more important question is whether the company will grow its profits over the years. This free a report showing analyst forecasts should help you form an opinion on SJVN
What about dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price performance. TSR is a calculation of return that takes into account the value of cash dividends (assuming any dividends received have been reinvested) and the calculated value of all discounted capital raisings and spinoffs. It’s fair to say that the TSR gives a more complete picture of stocks that pay a dividend. We note that for SJVN the TSR over the past 3 years was 86%, which is better than the stock price return mentioned above. The dividends paid by the company thus inflated the total return to shareholders.
A different perspective
It’s nice to see that SJVN shareholders have received a total shareholder return of 24% over the past year. Of course, this includes the dividend. That’s better than the 6% annualized return over half a decade, which implies the company has been doing better recently. Given that the stock price momentum remains strong, it might be worth taking a closer look at the stock lest you miss an opportunity. While it’s worth considering the various impacts that market conditions can have on the stock price, there are other, even more important factors. Take for example the ubiquitous specter of investment risk. We have identified 2 warning signs with SJVN and understanding them should be part of your investment process.
We’ll like SJVN better if we see big insider buys. In the meantime, watch this free list of growing companies with significant and recent insider buying.
Please note that the market returns quoted in this article reflect the average market-weighted returns of the stocks currently trading on the IN exchanges.
Valuation is complex, but we help make it simple.
Find out if SJVN is potentially overvalued or undervalued by viewing our full analysis, which includes fair value estimates, risks and warnings, dividends, insider trading and financial health.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.