The total return for ZF Commercial Vehicle Control Systems India (NSE:ZFCVINDIA) investors has risen faster than earnings growth over the last five years

It hasn't been the best quarter for ZF Commercial Vehicle Control Systems India Limited (NSE:ZFCVINDIA) shareholders, since the share price has fallen 28% in that time. But the silver lining is the stock is up over five years. However we are not very impressed because the share price is only up 88%, less than the market return of 178%.

In light of the stock dropping 3.0% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

See our latest analysis for ZF Commercial Vehicle Control Systems 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, ZF Commercial Vehicle Control Systems India achieved compound earnings per share (EPS) growth of 15% per year. This EPS growth is reasonably close to the 13% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Indeed, it would appear the share price is reacting to the EPS.

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 ZF Commercial Vehicle Control Systems India has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at ZF Commercial Vehicle Control Systems India's financial health with this free report on its balance sheet.

A Different Perspective

Investors in ZF Commercial Vehicle Control Systems India had a tough year, with a total loss of 23% (including dividends), against a market gain of about 28%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 14%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. To that end, you should be aware of the 1 warning sign we've spotted with ZF Commercial Vehicle Control Systems India .

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 Indian exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.