An Analytical Study on Earnings Growth and Price-Earnings Ratio Expansion of Indian Listed Mid-Cap Companies and Its Relation with Their Share Price Performance | Original Article

ABSTRACT:

Investors are always on the lookout for the stocks which could deliver multiple returns in the long run. Apart from the huge returns in terms of stock price there is additional benefit in terms of lower tax outgo as long term capital gains tax is always lower than short term gains tax. In addition investors have to monitor only few companies in terms of performance and need not change the stocks frequently and look for short term gains. With few potential wealth multipliers in portfolio investor has to only monitor the continuation of has good future prospects. The present study is an attempt to establish relation of the dependent variable (share price) with independent variable (growth in earnings per share for minimum three years), so as to predict the share price in relation to growth in earnings. Earnings Per Share (EPS) is the most important parameter because it directly tells us as to how much we pay in terms of share price and how much company earns in terms of Net Profit per year. This  paper  attempts  to  provide  empirical  evidence  on  how  growth in EPS and PE ratio over a minimum three year period affect  the  share  price  movement.