Buying shares in the best businesses can build meaningful wealth for you and your family. And highest quality companies can see their share prices grow by huge amounts. Don’t believe it? Then look at the Gabriel India Limited (NSE:GABRIEL) share price. It’s 503% higher than it was five years ago. If that doesn’t get you thinking about long term investing, we don’t know what will. It’s also good to see the share price up 14% over the last quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.
We love happy stories like this one. The company should be really proud of that performance!
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, Gabriel India achieved compound earnings per share (EPS) growth of 18% per year. This EPS growth is slower than the share price growth of 43% per year, over the same period. So it’s fair to assume the market has a higher opinion of the business than it did five years ago. That’s not necessarily surprising considering the five-year track record of earnings growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Gabriel India 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. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Gabriel India the TSR over the last 5 years was 539%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Although it hurts that Gabriel India returned a loss of 3.4% in the last twelve months, the broader market was actually worse, returning a loss of 5.2%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 45% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. Before deciding if you like the current share price, check how Gabriel India scores on these 3 valuation metrics.
Of course Gabriel India 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.
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 firstname.lastname@example.org. 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.