Hindustan Aeronautics' (NSE:HAL) five-year total shareholder returns outpace the underlying earnings growth

While Hindustan Aeronautics Limited (NSE:HAL) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 15% in the last quarter. But over five years returns have been remarkably great. In fact, during that period, the share price climbed 819%. Impressive! So it might be that some shareholders are taking profits after good performance. But the real question is whether the business fundamentals can improve over the long term. We love happy stories like this one. The company should be really proud of that performance!

Although Hindustan Aeronautics has shed ₹302b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

Check out our latest analysis for Hindustan Aeronautics

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Over half a decade, Hindustan Aeronautics managed to grow its earnings per share at 25% a year. This EPS growth is slower than the share price growth of 56% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

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

It's probably worth noting that the CEO is paid less than the median at similar sized 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. Dive deeper into the earnings by checking this interactive graph of Hindustan Aeronautics' earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Hindustan Aeronautics, it has a TSR of 972% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Hindustan Aeronautics has rewarded shareholders with a total shareholder return of 21% in the last twelve months. And that does include the dividend. Having said that, the five-year TSR of 61% a year, is even better. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. 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. For example, we've discovered 2 warning signs for Hindustan Aeronautics (1 is significant!) that you should be aware of before investing here.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.