Investors in Abbott India (NSE:ABBOTINDIA) have seen impressive returns of 259% over the past five years

When you buy a stock there is always a possibility that it could drop 100%. But on a lighter note, a good company can see its share price rise well over 100%. For example, the Abbott India Limited (NSE:ABBOTINDIA) share price has soared 237% in the last half decade. Most would be very happy with that.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

See our latest analysis for Abbott India

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, Abbott India achieved compound earnings per share (EPS) growth of 21% per year. This EPS growth is slower than the share price growth of 27% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 48.58.

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

We know that Abbott India has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Abbott India's TSR for the last 5 years was 259%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Abbott India provided a TSR of 18% over the last twelve months. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 29% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. Before deciding if you like the current share price, check how Abbott India scores on these 3 valuation metrics.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.