Havells India Stock: Analyzing the 6% Weekly Drop and Yearly Performance

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Furthermore, you'd generally like to see the share price rise faster than the market. Unfortunately for shareholders, while the Havells India Limited ( ) share price is up 20% in the last five years, that's less than the market return. The last year has been disappointing, with the stock price down 15% in that time. In light of the stock dropping 6.0% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return. While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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. During five years of share price growth, Havells India achieved compound earnings per share (EPS) growth of 10% per year. This EPS growth is higher than the 4% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. Having said that, the market is still optimistic, given the P/E ratio of 56.85. The image below shows how EPS has tracked over time (if you click on the image you can see greater detail). It might be well worthwhile taking a look at our free . 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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Havells India's TSR for the last 5 years was 24%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return. A Different Perspective Havells India shareholders are down 14% for the year (even including dividends), but the market itself is up 4.9%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 4% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Havells India better, we need to consider many other factors. To that end, you should be aware of the . We will like Havells India better if we see some big insider buys. While we wait, check out this free Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Indian exchanges.