R.P.P. Infra Projects' (NSE:RPPINFRA) five-year earnings growth trails the incredible shareholder returns

While R.P.P. Infra Projects Limited (NSE:RPPINFRA) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 22% in the last quarter. But that does not change the realty that the stock's performance has been terrific, over five years. In that time, the share price has soared some 365% higher! Arguably, the recent fall is to be expected after such a strong rise. The most important thing for savvy investors to consider is whether the underlying business can justify the share price gain.

Since the stock has added ₹677m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

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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, R.P.P. Infra Projects managed to grow its earnings per share at 22% a year. This EPS growth is lower than the 36% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here .

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between R.P.P. Infra Projects' total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that R.P.P. Infra Projects' TSR of 517% over the last 5 years is better than the share price return.

A Different Perspective

It's good to see that R.P.P. Infra Projects has rewarded shareholders with a total shareholder return of 29% in the last twelve months. Having said that, the five-year TSR of 44% 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. 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 1 warning sign for R.P.P. Infra Projects that you should be aware of.

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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.