Ashoka Buildcon's (NSE:ASHOKA) five-year earnings growth trails the impressive shareholder returns

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But when you pick a company that is really flourishing, you can make more than 100%. One great example is Ashoka Buildcon Limited (NSE:ASHOKA) which saw its share price drive 227% higher over five years. In more good news, the share price has risen 10% in thirty days.

The past week has proven to be lucrative for Ashoka Buildcon investors, so let's see if fundamentals drove the company's five-year performance.

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In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Over half a decade, Ashoka Buildcon managed to grow its earnings per share at 62% a year. This EPS growth is higher than the 27% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 3.28.

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

We know that Ashoka Buildcon has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Ashoka Buildcon will grow revenue in the future.

A Different Perspective

Ashoka Buildcon shareholders are down 16% for the year, but the market itself is up 3.7%. 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 27%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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 Ashoka Buildcon you should know about.

Of course Ashoka Buildcon 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.