The maximum amount you can lose on any stock (assuming no leverage is used) is 100% of your capital. But on the bright side, you can make well over 100% returns on really good stocks. for example, Power Finance Corporation Limited (NSE:PFC) shares have soared 109% over the past five years. Most people will be very happy with it. What’s more, the stock is up 23% in about a quarter.
After seven days of solid performance, let’s see how the company’s fundamentals have played a role in driving long-term shareholder returns.
Get the latest analysis on Power Finance.
SWOT Analysis of Power Finance
- Debt is well covered by income.
- Dividends are among the top 25% of dividend payers in the market.
- Revenue growth over the past year has outperformed the diversified financial industry.
- Transactions that are 20% or more below the estimated fair value.
- PFC’s earnings outlook is difficult to determine as it is not covered by analysts.
- Debt is not fully covered by operating cash flow.
- We pay dividends, but the company has no free cash flow.
To quote Buffett, “Ships sail the world, but the Flat Earth Society thrives. There will continue to be a great discrepancy between price and value in the market…” One flawed but reasonable way to assess how stock prices have changed is to compare earnings per share (EPS) to stock prices.
During the five-year stock rally, Power Finance grew its compound earnings per share (EPS) by 17% annually. This makes EPS growth particularly close to annual stock growth of 16%. This indicates that investor sentiment toward the company has not changed significantly. In fact, stock prices appear to respond to EPS.
The image below shows how the EPS changed over time (click the image to see the exact values).
Note that CEO salaries are lower than the median for companies of similar size. CEO compensation is always worth keeping an eye on, but the bigger question is whether the company will be profitable for years to come.Might be worth taking a look at us free Power Finance earnings, income, and cash flow reports.
When looking at return on investment, it’s important to consider the following differences: Total shareholder return (TSR) and stock price returnTSR is an earnings calculation that accounts for the value of cash dividends (assuming dividends received are reinvested) and the calculated value of discounted capital raisings and spin-offs. Arguably, the TSR is a more comprehensive representation of the returns generated by equities. For Power Finance, TSR over the last five years is 191%. This outperforms the aforementioned stock return. This is primarily a result of dividend payments!
another point of view
We are pleased that Power Finance shareholders achieved a total shareholder return of 67% last year. Including dividends, of course. This increase is better than the five-year annual TSR of 24%. So the sentiment around the company seems to be positive these days. Given that share price momentum remains strong, it may be worth taking a closer look at the share price to avoid missing opportunities. I find it very interesting to look at stock prices over the long term as an indicator of performance. But for true insight, other information must also be considered.For example we discovered Two Warning Signs of Power Finance (1 is a little worrying!) Things to know before investing here.
If you see big insider acquisitions, you’ll like Power Finance better.Check here while you wait free A list of growing companies that have made significant recent insider acquisitions.
Please note that the market returns quoted in this article reflect the market weighted average return on stocks currently traded on Indian exchanges.
Valuation is complicated, but we’re here to help make it simple.
Check out our comprehensive analysis, including the following, to find out if power finance is potentially over- or undervalued. Fair value estimates, risks and warnings, dividends, insider trading and financial health.
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This article by Simply Wall St is general in nature. We provide comments based on historical data and analyst projections using only unbiased methodologies and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. We aim to deliver long-term focused analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Is not …