Asahi India Glass' (NSE:ASAHIINDIA) five-year earnings growth trails the 32% YoY shareholder returns

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on a lighter note, a good company can see its share price rise well over 100%. One great example is Asahi India Glass Limited (NSE:ASAHIINDIA) which saw its share price drive 289% higher over five years. Also pleasing for shareholders was the 18% gain in the last three months. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.

Since it's been a strong week for Asahi India Glass shareholders, let's have a look at trend of the longer term fundamentals.

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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, Asahi India Glass achieved compound earnings per share (EPS) growth of 48% per year. The EPS growth is more impressive than the yearly share price gain of 31% over the same period. Therefore, it seems the market has become relatively pessimistic about the company. Of course, with a P/E ratio of 60.38, the market remains optimistic.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of Asahi India Glass' earnings, revenue and cash flow.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Asahi India Glass the TSR over the last 5 years was 294%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Asahi India Glass has rewarded shareholders with a total shareholder return of 35% in the last twelve months. That's including the dividend. That gain is better than the annual TSR over five years, which is 32%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Asahi India Glass , and understanding them should be part of your investment process.

Asahi India Glass is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been 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.