India Tourism Finance Corporation Limited (NSE:TFCILTD) Shareholders will no doubt be very grateful to see the stock price rise 48% in the last quarter. But over the past half-decade, the stock hasn’t performed well. You would have been much better off buying an index fund, since the stock has fallen 43% over that half-decade.
The recent 17% rise could be a positive sign of things to come, so let’s take a lot of look at historical fundamentals.
Our analysis indicates that TFCILTD is potentially undervalued!
It is undeniable that markets are sometimes efficient, but prices do not always reflect the underlying performance of companies. An imperfect but simple way to examine the evolution of a company’s perception by the market is to compare the evolution of earnings per share (EPS) with the evolution of the share price.
During the unfortunate half-decade in which the share price fell, the Tourism Finance Corporation of India actually saw its earnings per share (EPS) improve by 1.9% a year. So it doesn’t seem like EPS is a great guide to understanding how the market values the stock. Alternatively, growth expectations may have been unreasonable in the past.
Looking at these numbers, we would say that the market was expecting much higher growth five years ago. Looking at other metrics might better explain the change in the stock price.
We don’t think the 1.5% is a big factor in the stock price because it’s pretty low, as far as dividends go. Turnover is actually up 1.3% over the period. So it looks like we need to take a closer look at the fundamentals to understand why the stock price is languishing. After all, there may be an opportunity.
You can see how earnings and income have changed over time in the image below (click on the graph to see exact values).
If you are thinking of buying or selling shares of Tourism Finance Corporation of India, you should check out this FREE detailed report on its balance sheet.
What about dividends?
It is important to consider the total shareholder return, as well as the stock price return, for a given stock. TSR is a calculation of return that takes into account the value of cash dividends (assuming any dividends received have been reinvested) and the calculated value of all discounted capital raisings and spinoffs. So for companies that pay a generous dividend, the TSR is often much higher than the stock price return. Note that for Tourism Finance Corporation of India the TSR over the past 5 years was -38%, which is better than the stock price return mentioned above. The dividends paid by the company thus inflated the total return to shareholders.
A different perspective
It is pleasing to see that the shareholders of the Tourism Finance Corporation of India received a total shareholder return of 26% over the past year. This includes the dividend. There is no doubt that these recent returns are much better than TSR’s loss of 7% per year over five years. We generally value long-term performance more than short-term performance, but the recent improvement could point to a (positive) inflection point within the company. While it’s worth considering the various impacts that market conditions can have on the stock price, there are other, even more important factors. Take for example the ubiquitous specter of investment risk. We have identified 4 warning signs with Tourism Finance Corporation of India (at least 1 which should not be ignored), and understanding them should be part of your investment process.
If you’re like me, then you not want to miss this free list of growing companies insiders are buying.
Please note that the market returns quoted in this article reflect the average market-weighted returns of the stocks currently trading on the IN exchanges.
Valuation is complex, but we help make it simple.
Find out if Indian Tourism Finance Corporation is potentially overvalued or undervalued by viewing our full analysis, which includes fair value estimates, risks and warnings, dividends, insider trading and financial health.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.
