H.G. Infra Engineering's (NSE:HGINFRA) earnings growth rate lags the 37% CAGR delivered to shareholders

H.G. Infra Engineering Limited (NSE:HGINFRA) shareholders have seen the share price descend 10% over the month. But over five years returns have been remarkably great. Indeed, the share price is up a whopping 376% in that time. So we don't think the recent decline in the share price means its story is a sad one. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price.

In light of the stock dropping 6.1% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

Check out our latest analysis for H.G. Infra Engineering

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, H.G. Infra Engineering achieved compound earnings per share (EPS) growth of 30% per year. This EPS growth is reasonably close to the 37% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. Indeed, it would appear the share price is reacting to the EPS.

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

Dive deeper into H.G. Infra Engineering's key metrics by checking this interactive graph of H.G. Infra Engineering'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. In the case of H.G. Infra Engineering, it has a TSR of 379% 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 H.G. Infra Engineering has rewarded shareholders with a total shareholder return of 28% in the last twelve months. Of course, that includes the dividend. However, the TSR over five years, coming in at 37% per year, is even more impressive. 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. Take risks, for example - H.G. Infra Engineering has 1 warning sign we think you should be aware of.

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.