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Vadilal Industries Limited (NSE:VADILALIND) shareholders have seen the share price descend 16% over the month. But that doesn't change the fact that shareholders have received really good returns over the last five years. Indeed, the share price is up an impressive 189% in that time. We think it's more important to dwell on the long term returns than the short term returns. Ultimately business performance will determine whether the stock price continues the positive long term trend.
See our latest analysis for Vadilal Industries
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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, Vadilal Industries achieved compound earnings per share (EPS) growth of 78% per year. The EPS growth is more impressive than the yearly share price gain of 24% over the same period. Therefore, it seems the market has become relatively pessimistic about the company. The reasonably low P/E ratio of 9.01 also suggests market apprehension.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into Vadilal Industries's key metrics by checking this interactive graph of Vadilal Industries's earnings, revenue and cash flow.
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 Vadilal Industries the TSR over the last 5 years was 192%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
We regret to report that Vadilal Industries shareholders are down 41% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 2.8%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 24%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Is Vadilal Industries cheap compared to other companies? These 3 valuation measures might help you decide.