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We think that it's fair to say that the possibility of finding fantastic multi-year winners is what motivates many investors. Mistakes are inevitable, but a single top stock pick can cover any losses, and so much more. For example, the Radico Khaitan Limited (NSE:RADICO) share price is up a whopping 337% in the last three years, a handsome return for long term holders. It's down 2.9% in the last seven days.
Check out our latest analysis for Radico Khaitan
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Radico Khaitan was able to grow its EPS at 22% per year over three years, sending the share price higher. This EPS growth is lower than the 63% average annual increase in the share price. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It's not unusual to see the market 're-rate' a stock, after a few years of 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 Radico Khaitan has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Radico Khaitan will grow revenue in the future.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Radico Khaitan's TSR for the last 3 years was 344%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's nice to see that Radico Khaitan shareholders have received a total shareholder return of 3.0% over the last year. That's including the dividend. Having said that, the five-year TSR of 25% a year, is even better. 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 would like to research Radico Khaitan in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.