Avanti Feeds' (NSE:AVANTIFEED) five-year earnings growth trails the favorable shareholder returns

Simply Wall St · 10/15 00:11

The main point of investing for the long term is to make money. Better yet, you'd like to see the share price move up more than the market average. But Avanti Feeds Limited (NSE:AVANTIFEED) has fallen short of that second goal, with a share price rise of 54% over five years, which is below the market return. On a brighter note, more newer shareholders are probably rather content with the 46% share price gain over twelve months.

Since it's been a strong week for Avanti Feeds shareholders, let's have a look at trend of the longer term fundamentals.

View our latest analysis for Avanti Feeds

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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, Avanti Feeds achieved compound earnings per share (EPS) growth of 6.2% per year. This EPS growth is lower than the 9% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

earnings-per-share-growth
NSEI:AVANTIFEED Earnings Per Share Growth October 15th 2024

We know that Avanti Feeds has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Avanti Feeds will grow revenue in the future.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Avanti Feeds the TSR over the last 5 years was 63%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that Avanti Feeds shareholders have received a total shareholder return of 47% over one year. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 10% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Avanti Feeds , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Indian exchanges.