Uflex (NSE:UFLEX) pulls back 8.5% this week, but still delivers shareholders impressive 28% CAGR over 5 years

Simply Wall St · 10/19 02:00

Uflex Limited (NSE:UFLEX) shareholders might be concerned after seeing the share price drop 14% in the last month. But that scarcely detracts from the really solid long term returns generated by the company over five years. In fact, the share price is 231% higher today. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. Only time will tell if there is still too much optimism currently reflected in the share price.

While the stock has fallen 8.5% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

Check out our latest analysis for Uflex

There is no denying that markets are sometimes efficient, but prices do not always reflect 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.

Uflex has made a profit in the past. On the other hand, it reported a trailing twelve months loss, suggesting it isn't reliably profitable. So it might be better to look at other metrics to try to understand the share price.

We doubt the modest 0.2% dividend yield is attracting many buyers to the stock. In contrast revenue growth of 15% per year is probably viewed as evidence that Uflex is growing, a real positive. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
NSEI:UFLEX Earnings and Revenue Growth October 19th 2024

Take a more thorough look at Uflex's financial health with this free report on its balance sheet.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Uflex the TSR over the last 5 years was 239%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Uflex shareholders have received a total shareholder return of 45% over the last year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 28% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Uflex (at least 2 which shouldn't be ignored) , and understanding them should be part of your investment process.

But note: Uflex may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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