Datamatics Global Services' (NSE:DATAMATICS) five-year total shareholder returns outpace the underlying earnings growth

Datamatics Global Services Limited (NSE:DATAMATICS) shareholders might be concerned after seeing the share price drop 16% 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 501% higher! So we don't think the recent decline in the share price means its story is a sad one. But the real question is whether the business fundamentals can improve over the long term. It really delights us to see such great share price performance for investors.

In light of the stock dropping 3.1% 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.

See our latest analysis for Datamatics Global Services

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Over half a decade, Datamatics Global Services managed to grow its earnings per share at 17% a year. This EPS growth is slower than the share price growth of 43% 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).

We know that Datamatics Global Services has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Datamatics Global Services will grow revenue in the future.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Datamatics Global Services the TSR over the last 5 years was 523%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Datamatics Global Services provided a TSR of 37% over the last twelve months. But that return falls short of the market. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 44% over five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. It's always interesting to track share price performance over the longer term. But to understand Datamatics Global Services better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Datamatics Global Services (of which 1 is a bit unpleasant!) you should know about.

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.