Newgen Software Technologies (NSE:NEWGEN) stock is outperforming its underlying earnings growth over the past three years

Generally, as a stock picker, investors are inspired by the potential to find the big winners. You won’t always get it right, but when you do, the returns can be truly fantastic. There has been one bright shining star supply Newgen Software Technologies Limited (NSE:NEWGEN), which is up 385% from three years ago. Furthermore, the stock price is up 36% in about a quarter.

The past week has proven to be lucrative for Newgen Software Technologies investors, so let’s take a look at whether the fundamentals have driven the company’s three-year performance.

Check out our latest analysis for Newgen Software Technologies

To quote Buffett, “Ships will sail around the world, but the Flat Earth Society will prosper. There will continue to be wide discrepancies between price and value in the marketplace…” An imperfect but simple way to think about how the market perception of a company has changed is to look at the change in its earnings per share (EPS). comparable to the share price. price movement.

Newgen Software Technologies was able to grow its earnings per share by 25% per year in three years, causing its stock price to rise. This earnings per share growth is lower than the average annual share price increase of 69%. So it’s fair to assume that the market has a higher opinion of the company than it did three years ago. That’s not necessarily surprising, given its three-year track record of earnings growth.

In the image below you can see how EPS has changed over time (click on the chart to see the exact values).

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NSEI:NEWGEN earnings per share growth November 21, 2023

We know Newgen Software Technologies has improved its bottom line lately, but will its revenue increase? Check whether analysts think Newgen Software Technologies will grow revenue in the future.

What about dividends?

When looking at investment returns, it is important to consider the difference between the two total shareholder return (TSR) and stock price return. The TSR is a return calculation that takes into account the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. The TSR undoubtedly gives a more comprehensive picture of the returns generated by a stock. We note that for Newgen Software Technologies the TSR over the last three years was 397%, which is better than the share price return mentioned above. And there’s no prize to be won if you suspect that dividend payments explain much of the difference!

a different perspective

It’s nice to see that Newgen Software Technologies shareholders have received a total shareholder return of 291% over the last year. And that includes the dividend. That gain is better than the five-year annual TSR, which is 34%. It therefore seems that sentiment around the company has been positive lately. Someone with an optimistic perspective might view the recent improvement in TSR as an indication that the company itself is getting better over time. It is always interesting to follow the price development of shares in the longer term. But to better understand Newgen Software Technologies, we need to consider many other factors. However, please note that it shows Newgen Software Technologies Two warning signs in our investment analysis you should know about…

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If you like to buy shares in addition to management, then this might be for you free list of companies. (Hint: insiders bought them).

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

Valuation is complex, but we help make it simple.

Find out whether Newgen Software Technologies may be over or undervalued by checking out our comprehensive analysis, including: fair value estimates, risks and cautions, dividends, insider transactions and financial health.

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This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. We aim to provide you with targeted, long-term analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Simply Wall St has no positions in the stocks mentioned.