Federal Bank (NSE:FEDERALBNK) Shareholders Have Enjoyed A 96% Share Price Gain

The simplest way to invest in stocks is to buy exchange traded funds. But in our experience, buying the right stocks can give your wealth a significant boost. For example, the The Federal Bank Limited (NSE:FEDERALBNK) share price is up 96% in the last five years, slightly above the market return. In comparison, the share price is down 7.5% in a year.

See our latest analysis for Federal Bank

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Over half a decade, Federal Bank managed to grow its earnings per share at 21% a year. This EPS growth is higher than the 14% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 11.58.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Dive deeper into Federal Bank's key metrics by checking this interactive graph of Federal Bank's earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Federal Bank's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Federal Bank's TSR of 105% for the 5 years exceeded its share price return, because it has paid dividends.

A Different Perspective

Investors in Federal Bank had a tough year, with a total loss of 7.5%, against a market gain of about 23%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 15% per year over half a decade. 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 2 warning signs we've spotted with Federal Bank .

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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

If you’re looking to trade Federal Bank, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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