Cochin Shipyard's (NSE:COCHINSHIP) 114% CAGR outpaced the company's earnings growth over the same three-year period

Cochin Shipyard Limited (NSE:COCHINSHIP) shareholders might be concerned after seeing the share price drop 16% in the last quarter. But that doesn't change the fact that the returns over the last three years have been spectacular. Over that time, we've been excited to watch the share price climb an impressive 815%. As long term investors the recent fall doesn't detract all that much from the longer term story. The thing to consider is whether there is still too much elation around the company's prospects. We love happy stories like this one. The company should be really proud of that performance!

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

View our latest analysis for Cochin Shipyard

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 three years of share price growth, Cochin Shipyard achieved compound earnings per share growth of 12% per year. In comparison, the 109% per year gain in the share price outpaces the EPS growth. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. That's not necessarily surprising considering the three-year track record of earnings growth. This optimism is also reflected in the fairly generous P/E ratio of 47.90.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

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 Cochin Shipyard's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Cochin Shipyard the TSR over the last 3 years was 887%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Cochin Shipyard shareholders have received a total shareholder return of 173% over one year. Of course, that includes the dividend. That's better than the annualised return of 57% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Cochin Shipyard better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with Cochin Shipyard (including 1 which is a bit unpleasant) .

For those who like to find winning investments this free list of undervalued 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 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.