The total return for Ashoka Buildcon (NSE:ASHOKA) investors has risen faster than earnings growth over the last five years

Ashoka Buildcon Limited (NSE:ASHOKA) shareholders might be concerned after seeing the share price drop 29% in the last quarter. But that doesn't change the fact that the returns over the last five years have been very strong. Indeed, the share price is up an impressive 213% in that time. We think it's more important to dwell on the long term returns than the short term returns. Ultimately business performance will determine whether the stock price continues the positive long term trend.

Although Ashoka Buildcon has shed ₹4.8b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

Our free stock report includes 2 warning signs investors should be aware of before investing in Ashoka Buildcon. Read for free now.

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

During five years of share price growth, Ashoka Buildcon achieved compound earnings per share (EPS) growth of 136% per year. The EPS growth is more impressive than the yearly share price gain of 26% over the same period. So one could conclude that the broader market has become more cautious towards the stock. The reasonably low P/E ratio of 3.27 also suggests market apprehension.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that Ashoka Buildcon has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

A Different Perspective

It's good to see that Ashoka Buildcon has rewarded shareholders with a total shareholder return of 6.0% in the last twelve months. Having said that, the five-year TSR of 26% a year, is even better. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. 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. For example, we've discovered 2 warning signs for Ashoka Buildcon that you should be aware of before investing here.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.