India Tourism Finance Corporation Limited (NSE: TFCILTD) Shareholders should be pleased to see the stock price rise 19% over the past month. But that doesn’t change the fact that returns over the past three years have been less than pleasing. In fact, the stock price has fallen 51% over the past three years, well below market performance.
On a more encouraging note, the company has added ₹687m to its market cap in the last 7 days alone, so let’s see if we can work out what drove the three-year loss for shareholders.
See our latest analysis for Tourism Finance Corporation of India
While markets are a powerful pricing mechanism, stock prices reflect investor sentiment, not just underlying trading performance. An imperfect but simple way to examine how a company’s market perception has changed is to compare the evolution of earnings per share (EPS) with the movement of the share price.
Although the share price has declined over three years, Tourism Finance Corporation of India has actually managed to increase EPS by 1.7% per year during this period. It’s quite a puzzle and suggests that there could be something temporarily supporting the stock price. Alternatively, growth expectations may have been unreasonable in the past.
It is quite reasonable to suspect that the market was previously bullish on the stock and has since moderated expectations. But it is possible that a look at other measures will be enlightening.
With a rather weak yield of just 1.2%, we doubt the stock price is based on its dividend. With stable revenues over three years, it seems unlikely that the share price will reflect the turnover. We don’t know exactly why the stock price fell, but it seems likely that investors have become less optimistic about the company.
The graph below illustrates the evolution of income and income over time (reveal the exact values by clicking on the image).
This free The Interactive Balance Sheet Strength Report from the Tourism Finance Corporation of India is a great place to start if you want to dive deeper into the stock.
What about dividends?
It is important to consider the total shareholder return, as well as the stock price return, for a given stock. The TSR incorporates the value of any spin-offs or discounted capital increases, as well as any dividends, based on the assumption that dividends are reinvested. It’s fair to say that the TSR gives a more complete picture of stocks that pay a dividend. We note that for Tourism Finance Corporation of India the TSR over the last 3 years was -48%, which is better than the stock price return mentioned above. And there’s no price guessing that dividend payouts largely explain the divergence!
A different perspective
Tourism Finance Corporation of India shareholders earned a total return of 34% during the year. But this yield is lower than the market. On the bright side, it’s still a gain, and it’s actually better than the 5% average return over half a decade. Returns may improve with company fundamentals. While it’s worth considering the various impacts that market conditions can have on the stock price, there are other, even more important factors. For example, we have identified 4 warning signs for Tourism Finance Corporation of India (1 is potentially serious) of which you should be aware.
If you’d rather check out another company – one with potentially superior finances – then don’t miss this free list of companies that have proven that they can increase their profits.
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.
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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.
