The worst that can happen when you acquire a stock (without leverage) is if its share price falls to zero. However, if you invest in a truly exceptional firm, you can more than double your money.
For example, the share price of Central Depository Services (India) Limited (NSE:CDSL) is 293% higher than it was three years ago. What a treat for those who held the shares! Meanwhile, the share price is up 5.0% from a week earlier.
Following a strong 7-day performance, let’s examine the impact of the company’s fundamentals in creating long-term shareholder returns.
Central Depository Services (India) SWOT Analysis
Strength
- Currently debt free.
Weakness
- Earnings have fallen in the last year.
- Dividend is low when compared to the top 25% of dividend payers in Capital Markets.
- Based on the P/E ratio and projected fair value, the stock is expensive.
Opportunity
- Annual revenue is expected to outpace the Indian market.
Threat
- Cash flow does not cover dividends.
- Annual earnings are expected to expand at a slower rate than the Indian market.
While some continue to teach the efficient markets concept, it has been demonstrated that markets are too reactive dynamic systems, and investors are not always rational. We may obtain a sense of how investor sentiments towards a company have changed over time by comparing earnings per share (EPS) and share price fluctuations.
Central Depository Services (India) was able to grow its EPS at 37% per year over three years, sending the share price higher. This EPS growth is lower than the 58% average annual increase in the share price.
As a result, it’s reasonable to believe that the market now has a greater opinion of the company than it did three years ago. Given the three-year track record of earnings increase, this is not surprising.
What About Dividends?
It is critical to analyse both the overall shareholder return and the share price return for each given stock. The TSR includes the value of any spin-offs or discounted capital raisings, as well as any dividends, assuming dividends are reinvested.
We observe that the TSR for Central Depository Services (India) for the last three years was 304%, which is higher than the share price return given above. And no prizes for guessing that the dividend payments account for the majority of the difference!
A Different Perspective
While the overall market gained roughly 11% in the previous year, Central Depository Services (India) shareholders lost 12% (even after dividends). Even solid firms’ share prices fall from time to time, but before we get too excited, we want to observe improvements in a company’s basic data. Long-term investors would be less upset because they would have made 32% each year for five years.
While considering the many effects that market conditions can have on the share price is crucial, there are other aspects that are even more important. Nonetheless, Central Depository Services (India) is displaying two warning indicators in our investment research, one of which should not be overlooked…
Look at more info: https://learningsharks.in/
Follow us on insta” http://learningsharks