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The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But when you pick a company that is really flourishing, you can make more than 100%. One great example is Bodal Chemicals Limited (NSE:BODALCHEM) which saw its share price drive 279% higher over five years. On top of that, the share price is up 19% in about a quarter. But this move may well have been assisted by the reasonably buoyant market (up 8.6% in 90 days).
See our latest analysis for Bodal Chemicals
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 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, Bodal Chemicals achieved compound earnings per share (EPS) growth of 37% per year. This EPS growth is higher than the 31% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. The reasonably low P/E ratio of 9.63 also suggests market apprehension.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free interactive report on Bodal Chemicals's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Bodal Chemicals, it has a TSR of 288% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We're pleased to report that Bodal Chemicals shareholders have received a total shareholder return of 9.9% over one year. And that does include the dividend. However, the TSR over five years, coming in at 31% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.