Paramount Communications (NSE:PARACABLES) jumps 12% this week, though earnings growth is still tracking behind three-year shareholder returns

It hasn't been the best quarter for Paramount Communications Limited (NSE:PARACABLES) shareholders, since the share price has fallen 17% in that time. But over the last three years the stock has shone bright like a diamond. Indeed, the share price is up a whopping 823% in that time. So the recent fall doesn't do much to dampen our respect for the business. Only time will tell if there is still too much optimism currently reflected in the share price. It really delights us to see such great share price performance for investors.

Since the stock has added ₹2.4b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Paramount Communications

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Paramount Communications was able to grow its EPS at 94% per year over three years, sending the share price higher. We note that the 110% yearly (average) share price gain isn't too far from the EPS growth rate. Coincidence? Probably not. That suggests that the market sentiment around the company hasn't changed much over that time. Quite to the contrary, the share price has arguably reflected the EPS growth.

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

It might be well worthwhile taking a look at our free report on Paramount Communications' earnings, revenue and cash flow.

A Different Perspective

It's good to see that Paramount Communications has rewarded shareholders with a total shareholder return of 139% in the last twelve months. That gain is better than the annual TSR over five years, which is 47%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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 instance, we've identified 2 warning signs for Paramount Communications (1 is a bit concerning) that you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.