Did ICICI Bank's (NSE:ICICIBANK) Share Price Deserve to Gain 32%?

Stock pickers are generally looking for stocks that will outperform the broader market. And the truth is, you can make significant gains if you buy good quality businesses at the right price. To wit, the ICICI Bank share price has climbed 32% in five years, easily topping the market return of 18% (ignoring dividends).

View our latest analysis for ICICI Bank

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

ICICI Bank's earnings per share are down 5.1% per year, despite strong share price performance over five years.

This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

On the other hand, ICICI Bank's revenue is growing nicely, at a compound rate of 9.7% over the last five years. In that case, the company may be sacrificing current earnings per share to drive growth.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

We know that ICICI Bank has improved its bottom line lately, but what does the future have in store? So we recommend checking out this free report showing consensus forecasts

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between ICICI Bank's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for ICICI Bank shareholders, and that cash payout contributed to why its TSR of 37%, over the last 5 years, is better than the share price return.

A Different Perspective

We regret to report that ICICI Bank shareholders are down 12% for the year. Unfortunately, that's worse than the broader market decline of 3.3%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 6.4% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 2 warning signs for ICICI Bank (1 is potentially serious) that you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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

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This article by Simply Wall St is general in nature. 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.
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