Ahluwalia Contracts (India) (NSE:AHLUCONT) stock performs better than its underlying earnings growth over last five years

Buying shares in the best businesses can build meaningful wealth for you and your family. While not every stock performs well, when investors win, they can win big. Don't believe it? Then look at the Ahluwalia Contracts (India) Limited (NSE:AHLUCONT) share price. It's 317% higher than it was five years ago. And this is just one example of the epic gains achieved by some long term investors. We note the stock price is up 7.5% in the last seven days.

The past week has proven to be lucrative for Ahluwalia Contracts (India) investors, so let's see if fundamentals drove the company's five-year performance.

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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.

Over half a decade, Ahluwalia Contracts (India) managed to grow its earnings per share at 36% a year. So the EPS growth rate is rather close to the annualized share price gain of 33% per year. This indicates that investor sentiment towards the company has not changed a great deal. Rather, the share price has approximately tracked EPS growth.

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

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on Ahluwalia Contracts (India)'s earnings, revenue and cash flow.

A Different Perspective

We regret to report that Ahluwalia Contracts (India) shareholders are down 16% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 3.5%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 33% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Ahluwalia Contracts (India) you should know about.

Of course Ahluwalia Contracts (India) may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.