ZF Commercial Vehicle Control Systems India's (NSE:ZFCVINDIA) earnings growth rate lags the 21% CAGR delivered to shareholders

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. For instance, the price of ZF Commercial Vehicle Control Systems India Limited (NSE:ZFCVINDIA) stock is up an impressive 153% over the last five years. On top of that, the share price is up 17% in about a quarter. But this move may well have been assisted by the reasonably buoyant market (up 9.3% in 90 days).

Although ZF Commercial Vehicle Control Systems India has shed ₹11b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

View 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 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.

During five years of share price growth, ZF Commercial Vehicle Control Systems India achieved compound earnings per share (EPS) growth of 9.1% per year. This EPS growth is lower than the 20% average annual increase in the share price. 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 optimism is visible in its fairly high P/E ratio of 71.73.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It is of course excellent to see how ZF Commercial Vehicle Control Systems India has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling ZF Commercial Vehicle Control Systems India stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

ZF Commercial Vehicle Control Systems India shareholders gained a total return of 14% during the year. But that return falls short of the market. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 21% over five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. Before forming an opinion on ZF Commercial Vehicle Control Systems India you might want to consider these 3 valuation metrics.

We will like ZF Commercial Vehicle Control Systems India better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider 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.