The total return for Uno Minda (NSE:UNOMINDA) investors has risen faster than earnings growth over the last five years

While Uno Minda Limited (NSE:UNOMINDA) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 12% in the last quarter. But that doesn't change the fact that the returns over the last half decade have been spectacular. In that time, the share price has soared some 507% higher! So we don't think the recent decline in the share price means its story is a sad one. The most important thing for savvy investors to consider is whether the underlying business can justify the share price gain. We love happy stories like this one. The company should be really proud of that performance!

Although Uno Minda has shed ₹25b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

See our latest analysis for Uno Minda

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, Uno Minda achieved compound earnings per share (EPS) growth of 28% per year. This EPS growth is slower than the share price growth of 43% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 64.18.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It is of course excellent to see how Uno Minda has grown profits over the years, but the future is more important for shareholders. This free interactive report on Uno Minda's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Uno Minda the TSR over the last 5 years was 516%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Uno Minda shareholders have received a total shareholder return of 54% over one year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 44%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 example, we've discovered 1 warning sign for Uno Minda that you should be aware of before investing here.

But note: Uno Minda may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.