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We think all investors should try to buy and hold high quality multi-year winners. And highest quality companies can see their share prices grow by huge amounts. Just think about the savvy investors who held Tanla Solutions Limited (NSE:TANLA) shares for the last five years, while they gained 550%. And this is just one example of the epic gains achieved by some long term investors. On top of that, the share price is up 55% in about a quarter.
It really delights us to see such great share price performance for investors.
Check out our latest analysis for Tanla Solutions
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 half decade, Tanla Solutions became profitable. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. Indeed, the Tanla Solutions share price has gained 83% in three years. Meanwhile, EPS is up 53% per year. This EPS growth is higher than the 22% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
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 Tanla Solutions'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 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. We note that for Tanla Solutions the TSR over the last 5 years was 564%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!